It is often said that if you fail to plan, then you are inadvertently preparing to fail. Indeed, strategic business planning is one of the most important factors for any business of any size. It is essentially a process of documenting, establishing a direction for the business, and allocation of requisite resources for executing the plan of action.
While well-established companies carry out professional strategic planning, most small businesses do not. The reasons can be varied ranging from resource constraints, professional ignorance to complexities of the business or industry.
In Kenya, the above shortcomings have resulted in massive failures of enterprises. According to a survey by the Kenya National Bureau of Statistics (KNBS), a government agency in charge of official statistics, 46% of SMEs close within a year of founding. Another 15% of the surviving entities fail in their second year and only 39% get to their third year, a major milestone. At the end of five years, about 8% of the original enterprises will be left.
Even with the high rate of failure, SMEs in Kenya contribute immensely to the country’s GDP in their span of active business.
When the factors attributed to their failure are examined closely, one theme arises: strategic business planning problems. Despite the benefits of having a strategic plan in place, a growing number of small business owners aren’t focusing on the long-term strategies of their businesses.
At SMD Consulting Associates, within our strategy planning practice, we have worked with different types of SMEs across various industries and witnessed problems with planning in most of them.
If you are an aspiring entrepreneur or currently running a small business then you need to have a formal strategic business plan to improve the chances of your entity surviving in the long term. The question that follows is: how do you go about strategic business planning to boost the performance of your company?
Regardless of size, every entrepreneur should find time to be thoughtful about the future of their company. There are several strategic planning processes, and they use different terminologies. However, when they are all condensed we have four easy steps which are discussed in turn below.
1. Situation Analysis
This is the first step in strategic planning that involves an assessment of the company’s current situation by conducting internal and external business environment audits. The situation analysis is crucial because it will help you understand the company’s strengths and weaknesses, as well as its opportunities and threats. At the end of this process, you will be able to map out strategic issues to be addressed and ascertain the company’s position in the marketplace.
2. Formulate Corporate Objectives
Here, you get to define your strategy - the ultimate plan of action. To help you with this, the situation analysis will give you insights on what strategic areas and issues the company needs to pursue in a given period. From the analysis, for instance, you may discover that there’s a potential market in a new region that the company hasn’t explored yet. Based on the findings, you then need to set corporate objectives that will now guide the company forward. The objectives can touch on various issues critical to the business from customers, finance, to distribution. Always remember to keep your objectives Specific, Measurable, Actionable, Relevant and Timely (SMART).
3. Develop Implementation Plan
Having identified the direction the company needs to take, you now need to put together details on how the strategy is going to be achieved. This involves deciding on the action points, timelines, people to be involved, and financial resources required to pull through.
To ensure that you are successful, you must communicate the plan for the members of your team to understand the details well. The entire company staff need to be on the same page, pursuing the same mission and vision. Equally important, is ensuring there is a robust structure to see the implementation of the tactics to the last detail.
4. Evaluation and Review
This is the last stage and where you now proceed to prepare evaluation criteria to manage the performance of the strategy. After all, what gets measured gets done!
Given that implementation will be an ongoing exercise you need to continuously monitor factors affecting strategy rollout, measure performance, and take corrective actions to guarantee that the company remains on course. If you had decided to pursue new markets, for example, it will be important to look at how the company is performing in terms of sales revenue, costs or profits. If performance is deviating from the targets then you can take immediate corrective measures.
With the above done properly, the company will be on the right path to sustainable growth and prosperity. However, it is important to note that the business environment has today become highly volatile such that you can’t confidently plan too far into the future. This calls for constant environment scanning and business surveillance.
Now, are you ready to prepare a strategic plan for your business? Look no further! Click here to fill in your details for a callback. Alternatively, you can call us on 0748 812 310.
Stephen Osomba currently serves as the Lead Partner, Communication & Marketing at SMD Consulting Associates where he helps SME clients deliver value by adjusting the solutions to each company's mission, product, strategy, and industry.