Strategic planning strategies for small business owners

If you’re a small business owner, you’re probably perpetually behind the 8-ball, and you might not have had any time to put much thought into strategic plans for 2020. It’s not too late! A few simple tips can get you started in thinking about moving your business forward over the next 12 months. Getty Images

If you’re a small business owner or an executive of a small company, you probably fall into one of three categories:

1. You have your 2020 financial, strategic, and budget planning done and are kicking back with an eggnog to enjoy the holidays.

2. You started the process in October and will be harassing your staff to finish up sometime the third or fourth week of January.

3. No planning has taken place, and it just might not happen at all.

If you are in Group 2 or 3, welcome to the majority and don’t worry: You still have time. In fact, many of the clients that partner with me for strategy support start the planning process halfway into the fiscal year. It’s never too late to start, so following are some tips for getting going.

Planning the Earnings

Start with sales projections. Considering that my background includes 15 years in sales, it’s no surprise that I would start with this exercise. These days, I wear a different hat—that of a business owner—but even so, I still like to start the planning process with projections. Most of the strategic plan will have to be funded. It’s a lot easier to make decisions on project deployment when you know how much money you have to work with. I have clients pull a complete active customer list and review two to three years of revenue history, forecasts, and upcoming project launches for each one.

Typically, 80 percent of a small business’s revenue comes from 20 percent of its customers, and in extreme cases, it’s 90/10. You should spend the majority of your time on the 20 percent (or 10 percent) and make time to meet with your key contacts in those accounts to discuss their 2020 outlook. Customers typically are willing to share their growth expectations so their suppliers can support them adequately.

Planning the Goals

After you have sales projections complete, move on to strategic planning. Each department—sales, finance, production, engineering—should have a strategic plan that gets updated annually and rolls into an overall strategic plan for the company. If you have never done strategic planning as an organization, I recommend working with a consultant for a training session. You don’t have to make a huge investment; you can accomplish a lot in a one- or two-day in-house workshop. The strategic plan provides many functions, but most importantly it identifies three to five areas of focus to move the business forward in the new fiscal year.

Company leadership sets priorities at the highest level and uses those goals to assign performance metrics to each department. The departments then develop their strategic plan to achieve the metrics and set performance goals for each employee. The end result is an efficient and cohesive effort towards achievement.

Planning the Investments

The third exercise is budgeting. Once you have projected revenue and selected the strategies for deployment, it’s time to begin the funding process. The goals are to be achieved through processes, head count, systems, capital equipment, and infrastructure, and most of these have an associated cost. Each department should set a budget that rolls into an overall budget for the company. The revenue should fund the budget and achieve desired profit margins.

If there is a gap, you will need to re-evaluate budgets and growth targets. To maximize tax and financing advantages, review with finance and accounting any critical strategies that involve large capital expenditures. Once set, you can use these financial reports in decision-making throughout the year. For example, if revenue is missing by 20 percent halfway through the year, you’ll need to cut the second half of the budget to preserve profit.

Don’t Hesitate to Plan

It’s the time of year we start thinking about New Year’s resolutions. Why not add a New Fiscal Year resolution to your list and enhance the planning process in your organization? These three procedures are not all-encompassing, but they are a good start and foundation for the company.

At the very least, the planning process disciplines your team to spend some time working “on” the business instead of “in” the business—a good discipline for ourselves as well.