I’ve been writing about small business for a long time, and back when I started, it was standard advice to create business plans looking far into the future—five, 10 and even 20 years.
Of course, in the last few decades, business change has been happening at the speed of light, and advice to create a 10-year or even five-year plan seems almost antiquated now. After all, you may be thinking, how can you possibly know what’s going to happen five years from now? No wonder almost two-thirds (63 percent) of small business owners don’t have a five-year plan, according to a recent survey by Staples.
But contrary to what you may think, the rapid pace of business change is the best reason of all to develop a strategic plan that allows for a variety of scenarios and plans how your business will react to them.
How do you create a five-year strategic plan?
First, get a grip on how your business is doing today. Gather your business mission and vision statements, your business plan (no matter how outdated they might be), your sales data and your financial records. Hopefully, you’re already monitoring sales, cash flow, growth and other metrics using your accounting software and dashboard tools, but if not, take some time to get all the figures together.
Now that you know where you are, where do you want to be in five years? How big do you want your business to grow? Do you want to expand your product or service line, your target market, your staff, your distribution channels? Would you like to be selling nationally or even globally?
Sometimes it’s hard to envision your business’s future that far out. If you’re having this problem, start by picturing what you want your life to look like five years from now. Do you want to be working fewer hours? Do you want to be commanding a staff of 50? Would you like more time to focus on your personal life and direct the “big picture” of the business instead of the day-to-day, or do you want to still be directly involved in your business operations? Would you like to travel the world, get married, have kids or think about retirement? Putting your personal five-year goals in writing can help you figure out what business goals you’ll need to achieve to make them happen.
Once you’ve got personal and business five-year goals nailed down, work backward to identify what needs to happen to get you there. If you want to grow your business big enough to sell in five years, you’ll need to do things like expand sales, build a brand, delegate more and systematize so the company can run without you, and build value in the business to prepare it for sale. If you want to build a national chain, you’ll need to start by adding that second location and expanding regionally.
Working backwards from five years to set goals for three years and one year from now. Then figure out what actions you must take to reach those intermediate goals. You can also break your plan down into quarterly steps and goals. The closer you get to today, the more detailed your plan should be. For example, for the next year, you may want to list monthly goals and action items; three years out, you might list quarterly goals and actions.
Use a SWOT analysis to pinpoint your business’s strengths and weaknesses, as well as the opportunities and threats facing it from the industry, the economy and the competition. Keeping up to date on your target market/s and economic indicators will help you see troubles brewing so you can adjust your plan.
Your plan should cover all aspects of your business: marketing and sales, staffing, operations, financial projections and how you’ll generate or obtain the operating capital you need to reach your goals.
Creating a five-year strategic plan is hard work, but it’s also exciting and exhilarating. After all, you’re taking charge to make your business goals come true—what’s more rewarding than that?
Of course, your SCORE mentor can help you with every step of creating your strategic plan, and offer advice, tools and templates to help. Visit www.score.org for more.