The Power of a Strategic Plan

Operating a business without a strategic plan is like piloting a boat without a rudder. The business might be going somewhere, but no one knows for sure where or why, or if it is a good destination. Strategic planning is the process of assessing where the business is now and setting a path for where the business will be at some point in the future. In setting that path, the strategic plan should consider specific goals and establish actions that will help accomplish those goals. A written strategic plan helps owners, investors, and employees identify and understand how best to respond to opportunities and challenges.

In this post we will identify specific parts of the planning process that a business owner can follow to prepare a written plan. It is important to involve as many of the business’ stakeholders as possible in this process to avoid any blind spots that an owner may otherwise miss. Getting a broader perspective always makes planning better.

Situational Analysis

The place to start is assessing the current situation. There are several tools for this analysis, including SWOT, PEST, PESTLE, scenario planning, and the Porter’s Five Forces framework. Perhaps the best known and most commonly used is the SWOT analysis, which invites a candid review of the strengths, weaknesses, opportunities, and threats of a business. PEST and PESTLE assess major external factors in a marketplace that might impact the business. PEST is an acronym that stands for political, economic, social, and technological factors; the PESTLE analysis includes two additional factors: legal and environmental. The Porter’s Five Forces analysis more specifically addresses potential competition in the marketplace. Scenario planning is just that, considering alternative scenarios that might arise and planning responses to each scenario.

As shown in Figure 1, the SWOT analysis is done in a quadrant format lining up internal (strengths and weaknesses) vs. external (opportunities and threats) situations along the vertical axis and helpful (strengths and opportunities) vs. harmful (weaknesses and threats) situations along the horizontal axis.

Figure 1. The SWOT Analysis Grid

The SWOT Analysis Grid

In this way stakeholders can see the analysis in a quick one-page summary. A completed SWOT analysis is displayed in Figure 2. In this example, a new business owner is considering opening an insurance agency and has used SWOT to evaluate the situation.

Figure 2. Completed SWOT Analysis Example
Strengths:
  • Solid reputation of insurer
  • Recognized leader in industry
  • Well-known name and vast promotional campaigns
  • Great location at major intersection
  • Online and toll-free customer service access for extended hours
Weaknesses:
  • New agency, short track record in local market
  • Small staff, limited sales experience
  • No existing customers means no renewal income, dependent on new business
  • Allstate took two significant rate increases in 5 months
  • Enhanced commission for startups ends quickly
Opportunities:
  • Growing community–new homeowners, new move-ins needing new insurance coverage
  • Good economic growth in city and county
  • New location for an insurance agency
  • Owner’s ability to market for commercial business, not just personal insurance
  • Large network can become prospects or referral sources
Threats:
  • Major insurance agencies already established in town
  • Low-cost insurers present
  • Current economic downturn–fewer new car purchases, etc.
  • Slightly depressed trade area in immediate neighborhood
  • Excessive costs for obtaining leads and marketing campaigns

This analysis prepares the owner and other stakeholders to consider a vision for the future of the business. From that view, specific goals can be identified that would help attain that vision; these goals then guide the day-to-day operational action plans required to make it all happen.

The VGOST Strategic Plan Format

One common and effective strategic plan format is called VGOST, an acronym that stands for Vision, Goals, Objectives, Strategies, and Tactics. After completion of a thorough situational analysis, the next step is to set a vision for the future of the business. The vision is what the business is expected to be within a certain time frame.

While a mission statement identifies the purpose of the business, or what it does and why, a vision statement identifies what the stakeholders want to make of the business. Another way to think of it is the direction of the business in terms of growth, improvement, or competitive position. It is a description of what the business will be as the goals and objectives in the plan are achieved.

Goals are broad statements of what needs to be achieved in order to attain the vision statement. These goals could be set in various categories of business operations, marketing, and sales.

Objectives are more targeted in nature than goals and must be measurable and based on a time period. There may be several objectives under the heading of a single goal, each of which support achievement of the larger goal. For example, a goal to grow the number of customers in a business might have a few specific objectives like attend 1 public event each week to grow a network of contacts, contact 20 new prospects each month, add 10 new customers per month, and visit 10 current customers each month and build relationships. Each of these objectives supports the goal to retain and grow new customers. Each is specific, can be measured, and has a time frame for accomplishment.

The action steps that are undertaken to achieve the objectives take the form of strategies or tactics. A strategy is a specific approach or method to doing business, whereas a tactic is a specific activity. Strategies supporting the objectives in our example might be to make prospecting calls during certain hours of each business day, or to work with certain associations or affiliated groups of potential customers. Some tactics that support these same objectives might be to place a marketing campaign ad on a social media site at a certain time every weekday or make 20 prospecting phone calls during certain hours each weekday.

In Figure 3, we have created a mock strategic plan using the format discussed above. Notice the hierarchical relationship between the strategies, tactics, objectives, and goals. The strategies and tactics make up the day-to-day activities of a business that support attainment of the stated measurable objectives. The objectives support achieving the goals, and all of these pieces support the overall vision for the business.

Each one of the strategies and tactics is assigned to a specific staff member who is responsible for attainment of the objectives and goals. This example is only a small part of a strategic plan, but it need not be overly complex. For a small- to medium-sized business, two or three goals and one or two objectives per goal are sufficient to maintain momentum toward the overall vision.

Figure 3. Sample Strategic Plan in VGOST Format

Goal #1: Grow customer base to 1,000 customers.


Objective #1 – Add 10 new customers per week by July 1, 2021.
Strategies and TacticsPoint PersonTarget Date
Execute a Facebook advertising campaign each quarter of the year and measure effectiveness rate.MeMar 31
Jun 30
Sep 31
Dec 31
Make 20 telemarketing or networking contacts by telephone each day and measure each week.Me and my staffOngoing

Objective #2 – Retain 90% of customers and encourage repeat purchases at a rate of at least 50% by September 1, 2021.
Strategies and TacticsPoint PersonTarget Date
Develop a customer service program to maintain frequent contact with existing customers to be implemented by 3Q 2021.MeSep 30
Build brand loyalty through a frequent user rewards program offering discounts after multiple purchases. Deliverable by 2Q 2021.StaffMar 31

Goal #2: Attain 1 million followers online.

Objective #1 – Create an attractive website that draws viewers’ attention and becomes listed on the first page of a search engine search for my keywords by January 30, 2021.
Strategies and TacticsPoint PersonTarget Date
Hire a superb web designer and set expected completion date in the service agreement by December 1, 2020. Finalize the project by January.CIO (me?)Jan 5
Track effectiveness and SEO impact, adjust action plan as needed.CEO (me?)Jan 31 and ongoing

Objective #2 – Execute a comprehensive online marketing campaign that steadily increases followers by 100 new followers each month of 2021.
Strategies and TacticsPoint PersonTarget Date
Execute a social media campaign that attracts visitors to the website. Include an email gathering feature to begin developing a list of potential customers.CMO (me?)Jan 5
Execute an email marketing campaign to expand audience and attain return visits to website.CMOFeb 15 and ongoing
Create a blog that provides valuable information to potential customer audience to attract frequent visitors.CMOMar 15 and ongoing

Our example here is focused on marketing. As stated above, a written strategic plan would likely include other areas of the business and would follow this same format of goals, objectives, etc. and ultimately identify who is responsible with target completion dates. This way, all stakeholders in the business understand the direction and vision. Management and employees can move in that direction together and meet the strategic vision the business owners established.

For more on these and other topics, consider registering for the NaperLaunch Academy Workshop series. In addition, business librarians, NaperLaunch coaches, and SCORE mentors are available for one-to-one mentoring sessions.

Posted: 
Monday, March 29, 2021 - 08:45