Business planning has become a lost art.
On the surface, business planning seems like a common practice. Companies are producing business plans to get a loan or equity investment. Executives are holding meetings and projects are moving forward.
A 2015 national survey by Gallup/Wells Fargo in the United States showed only 33 percent of business owners said they have a formal business plan.
A 2013 Harvard Business Review article cited research which says that even in high-performing companies only 29% of their employees can correctly identify their company’s primary strategy out of six choices.
Shouldn’t businesses be planning more? After all, it’s hard to survive. About 15% of businesses fail in the first year. Only 50% of businesses survive for five years. Developing planning skills can be the difference between success and failure.
How formal does planning have to be? Of the roughly 1.1 million businesses in Canada, 98 percent are small businesses. Most of these businesses don’t engage in formal planning and probably don’t need to. With a small number of employees, plans and strategies are easily communicated amongst the small group.
As companies become larger, a more formal planning process should be in place that includes a communication strategy and encompasses all the major strategic elements to ensure nothing is overlooked. The key is understanding what stage your business is at, and what level of formality is needed in your planning process.
As a guide, more formal business planning is typically needed in larger businesses with 100 or more employees and in industries where change is rapid (such as the high-tech industry). It’s also essential for regulated industries where there are formal requirements to stay on course with the regulations. Businesses with large labor components also need formal planning because the cost of mistakes can be catastrophic.
What elements should be included in a formal business strategy?
Regardless of the level of formality or size of business, there are several key elements that should be included in every strategic plan:
- Mission/Vision/Values/Goals – to set long term direction and targets
- Business capabilities assessment – to understand where the business currently sits
- Analysis of strengths, weaknesses, opportunities, and threats – to understand what the company needs to consider, in order to reach its targets
- Financial projections and asset utilization projections – to formalize what the business will look like at each stage in the long-term plan, both financially and physically
- Risk assessment – multiple types of risk should be valued and mitigated, such as financial, legal, environmental, reputational, and operational risks
For smaller businesses, where the owner is a key stakeholder, personal and family goals should also be incorporated into the strategic planning process.
In an ideal situation, everyone in the business should know and understand the long-term strategy of the business and have some idea of how their activities align to that strategy.
Our business improvement services at Rise Advisors helps companies determine what type of strategic planning is needed and how formal it needs to be. We will help you through the process of developing the plan, communicating it to your employees, and ensuring you can successfully implement the plan.
At Rise Advisors we help our clients find and hone their business planning skills to reach their business goals and achieve the success they’ve dreamed of.