Guide
1. The purpose of strategic planning
The purpose of strategic planning is to set overall goals for your business and to develop a plan to achieve them. Where a business plan is about setting and implementing short or mid-term goals, a strategic plan is typically focused on mid to long-term goals.
The process provides an opportunity to consider where your business is headed, what its priorities should be, what resources and budget you will need to achieve this and how to ensure any staff and investors are on the same page.
2. Key elements of strategic planning
Effective strategy development requires a shift in focus from day-to-day concerns to your broader and longer-term business options.
As your business becomes larger and more complex, your strategy will become more sophisticated and informed by a wider range of information including how your business operates, and conditions in your current and potential markets.
To create an effective strategy, you need to look at:
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Where is your business now? Understand your business performance, current strengths and weaknesses, profitability and how you compare to competitors.
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Where do you want to be? Determine what you need to achieve and set your objectives.
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What do you need to do to get there? Outline the steps that you’ll need to take to achieve your objectives.
- How will you measure your progress? This will involve choosing key performance indicators and setting targets against them.
You should balance your vision for the business against the practical realities of your current position. You need to take into account the implications of any changes, such as increased investment in capital and other resources. A strategic plan needs to be realistically achievable.
3. Where is your business now?
Who are you?
Start with your mission statement. This is a simple sentence explaining what your business does and its overarching purpose or ‘mission’. This helps you keep your strategy on track and reinforces who you are and why you do what you do.
For example if you have launched a new bakery, your mission statement could be:
“We are the historic Scottish bakery bringing forgotten recipes back to life and making traditional bakes people’s first choice.”
How is your business currently performing?
Before you can set new objectives, it is critical to measure how your business is performing across key metrics, including:
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sales volumes and revenue
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profit and profit margins
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cashflow
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customer volume and acquisition figures
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customer satisfaction
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operational efficiency
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staff retention and satisfaction.
Who are your competitors?
Analyse your competitors by carrying out competitor research to assess where they sit in the marketplace and how you compare to them.
Identify:
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who your competitors are and what their purpose is
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their market share
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their product range and how it compares to yours
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their pricing strategy and how it compares to you
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how they promote themselves
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any other insights such as what they seem to do better/worse and what could you do differently.
What are your strengths, weaknesses, opportunities and threats?
Once you understand your current performance and competitors, you can analyse internal and external elements of your business to identify strengths, weaknesses, opportunities and threats. Otherwise known as a SWOT analysis, this helps you identify what you do well, what you need to improve, how to maximise opportunities and defend against challenges.
Internal factors
These include elements within your influence or control, such as your organisational structure, human resources, financial position,assets, culture, reputation and operations. A proper analysis should uncover where your business has competitive advantages and anything that is holding your business back.
A hypothetical bakery considering its reputation, might note the following.
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Strengths. What is your business best at? e.g. our traditional bakery has a dedicated and growing following
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Weaknesses. What is holding your business back? e.g. we are not seen as innovative.
External factors
These are elements that are generally not within your influence or control. As well as actions by competitors and members of your supply chain, this includes the macro-environmental context, often referred to as the acronym, PESTLE.
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Political - e.g. changes to taxation, trading relationships or grant support for businesses.
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Economic - e.g. interest rates, inflation and changes in consumer demand.
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Social - e.g. demographic trends or changing lifestyle patterns.
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Technological - e.g. the emergence of competing technologies or productivity-improving equipment for your business.
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Legal - e.g. changes to employment law or to the way your sector is regulated.
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Environmental - e.g. changing expectations of customers, regulators and employees on sustainable development.
Your analysis should help you identify any positive or negative external shifts and trends that can give you an advantage or lead to risks.
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Opportunities. Are there any gaps in the market you could fill? Are there any upcoming changes that will benefit you? E.g. there is a new television show about historic baking which is popular and driving social media interest and demand for this product category.
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Threats. What issues threaten your business?Are there any new products or competitors entering the market? Are there any legislative changes coming up? E.g. there is a shortage of some specialist traditional ingredients and rising costs which will squeeze margins.
Use analysis to inform actions
Now, leverage each element against the other, to help you generate ideas and new actions.
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Strengths vs opportunities. How might you use your strengths to maximise your opportunities? E.g. We could try to be involved with the TV show, or post our version of recipes on social media to our following and theirs.
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Strengths vs threats. How might you use your strengths to reduce the threats? E.g. We could help retain loyal customers by limiting specialist ingredients to a subscription service.
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Weaknesses vs opportunities. How might you reduce your weaknesses to take advantage of opportunities? E.g. We could create a range of bakes as shown in the TV show.
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Weaknesses vs threats. How might you minimise weaknesses and avoid threats? E.g. We could create a new innovative line merging more modern ingredients with traditional practices to overcome shortages.
4. Where do you want to be?
Once you know where your business is now, you can set goals and objectives to define where you want to go and what you want to achieve.
Determine your business goal
Ultimately, your main business goal is likely to have a financial driver, for example increasing your profitability, growing your customer base and revenue, or attracting a buyer.
It is important that this goal is well thought out and is indeed your ultimate aim, as it will be the beacon for all of your business activity. Your entire strategy will be created to help you achieve it, and it will drive all of your business decisions for the medium to long term.
Set your S.M.A.R.T objectives
To help you achieve your goal, and measure your progress against it, you will need to set clear and achievable objectives to help you get there.
Make sure all objectives you set are S.M.A.R.T (Specific, Measurable, Actionable, Relevant and Time-driven).
So for example, if your goal is “to double revenue”, one of your SMART objectives could be:
“To increase products sold in shop by 50% by Q2 next year”.
5. What do you need to do to get there?
Next, you will need to make a plan, detailing all of the tactics and actions you need to take, to achieve your business goal and SMART objectives. This will then inform your day-to-day business plan.
Implementation plan
The implementation plan details the actions, resources, timings, and responsibilities needed to implement the strategy and make your goal a reality
You will need to consider how your goal will impact each area of your business, and how they will work together to achieve the same goal. It is important to gain input from key staff and stakeholders to make sure everyone is on board and that the steps needed are clearly laid out.
Offering
Detail what changes if any need to be made to your product or service offering to achieve your goal, and how are you going to effect this. Will you need to develop new products or services? If so, how - and who will lead this? Or do you need to change your pricing strategy, your delivery, your manufacturing process?
Marketing
It is vital that you create a marketing plan with clear objectives and budget, to help you map out all the marketing activity that you will need to undertake to achieve your goal. This could include creating a new advertising campaign, developing new messaging and running social ads or events. Or you may need a new website or ecommerce shop.
Staffing
How will your team be impacted by your strategy? Make sure you assess your staffing needs and plan out how your team will need to change, communicate with existing staff, and understand the financial implications.
For example, if you are planning to grow, will you need to hire new staff or train existing staff to take on new responsibilities? How will you achieve this and how much are you budgeting for staff costs?
Operations
Consider how the day to day running of your business will need to change to support new activity. Will logistics need to adapt to accommodate any new products and services? Will there be any impact on your premises? Will you need new suppliers or stock control methods?
And if you are making changes to your productivity, plan any tools and technology you will be using and any training needed.
Finance
It is critical that you consider how you will finance all of the changes detailed in your strategy. Your financial projections must be accurate, and sustainable.
Ensure that you fully understand all cost implications, and have budgeted accordingly, assessing the impact on your cashflow and the need for any investment or funding before you kick off.
Risk
Ensure that you have assessed and fully understand the risks associated with your strategy, and how you will manage and mitigate them.
6. How will you measure your progress?
As part of your implementation plan, you should detail what success looks like against each tactic, detailing the key performance indicators (KPIs). These are the metrics that will be most useful for informing decisions in your business and tracking progress against your SMART objectives. KPIs will vary for each objective and some KPIs may be specific to departments or teams.
When choosing your KPIs, it is important to understand how you will be tracking them and where you can find the data. For example, you could be tracking:
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sales data through your customer relationship management (CRM) platform
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online traffic and sales through your website analytics tools
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social ad performance through various social platforms
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financial data through accounting software.
It is important to set benchmarks against the KPIs you have chosen, so you can regularly track performance.
If you are processing any personal data, you must ensure that you understand your legal obligations around data protection, including GDPR.
7. Next steps
For personalised support and help with strategic planning and business growth, speak to a Business Gateway adviser or look out for events and webinars on planning and growing your business.