Strategic Planning: Charting Your Path to Success

Crafting a long-term strategy is powerful. Translating the long-term strategy into an actionable business plan is critical to achieve an owner’s objectives. Together, the strategy and business plan will define the organization’s direction, guide resource allocation, and align everyday actions to achieve the entrepreneur’s goals.

However, many business owners struggle with documenting their ideas and strategies.

“Most owners we encounter have amazing ideas in their heads and have a semblance of a plan, but there’s nothing formal or written down on paper that the company can execute,” says Brett Miller, Partner at Richter. “We help business owners by providing them with a roadmap, a structured written plan that can guide the organization.”

For family businesses, key management and decision-makers are intimately aware of the organization’s past, present, and future direction. However, not documenting this knowledge increases the organizational reliance on a few stakeholders, raises the corporate risk profile, and reduces its resilience.

Businesses often view strategy, business planning and budgeting as synonymous, but they are not.

Business strategy, business planning, and budgeting – three core components – are distinct, yet highly intertwined. They cascade from one to the other, building on the previous decisions to turn vision into execution. In this article, we will review each of these components and provide guidance and considerations for owners and executives.

Strategy: Take the Long View

Your business strategy defines the overarching direction for the organization. You must focus on today’s opportunities and challenges, but also proactively prepare for an uncertain future amidst constantly changing market dynamics. Without a clear direction, a business can be easily sidetracked and waste valuable time and resources on non-value-adding projects and initiatives. Owners and executives must make explicit strategic choices to grow with intent.

Determine the Destination

Define the organization’s financial and non-financial objectives to create clear metrics. These should be aspirational, yet realistic, and they should clearly define success.

Owners and management teams often initially gravitate towards financial measures, such as revenues, profit, or enterprise value. While these are useful, assessing other aspects of business performance will provoke greater insights and create alternative avenues to monitor and incentivize performance.

Other metrics may include market share, customer or employee engagement, brand positioning, or channel penetration. Additionally, as public awareness and attention grow related to social and environmental impacts, businesses may use more objectives to assess performance, such as carbon footprint, sustainability scores, domestic market support, or one’s general reputation – to employees, customers, or community of stakeholders.

Objectives must be coherent and create a shared direction across owners, management, and employees. This means that the business’ strategic planning process should reflect the owner, specifically how the operating company can help achieve the business owner’s ambitions (e.g., wealth creation, succession planning). For private enterprises, ensuring alignment between business and owner goals is a key part to create lasting value that benefits both the business and family.

Do the Research

Strong owners and management teams know how to trust their intuition, but it may not be enough. In today’s markets, with ever-increasing complexity and competition, investing in research and analysis to drive sound decision-making is paramount.

Start with an internal assessment and determine the core strengths and weaknesses of the business. This is typically achieved by analyzing commercial and operational performance, consulting employees to capture on-the-ground observations, and benchmarking against peers and industry best practices. It is important to be honest and deal with current realities rather than soften the details and potentially misrepresent the organization. While strengths may confer a competitive advantage, they will erode over time as competition intensifies. Weaknesses can undermine strengths if not properly addressed and mitigated; new opportunities may also be discovered through the process when addressing weaker areas.

An external analysis is an important complement to the internal assessment. Understanding the market landscape and competitive environment will enable a company to identify and understand new opportunities and potential threats. The process can also serve to reinforce or refute owner / management beliefs, shining an objective light and additional nuance on their existing intuition.

Collectively, the internal and external analyses will identify potential value creation opportunities for the business. Initiatives can span external growth opportunities, such as new market / geographic expansion, customers, products / services, or channels, or internal improvement opportunities, such as operational enhancements, supply chain redesign, or business model evolution. Threats from changing competitive dynamics, consumer preferences, regulatory challenges, or other externally driven operational disruptions may also be proactively addressed.

Prioritize & Make Tough Decisions

Your business strategy should not only articulate what the organization will do, but also what it will not do. This is challenging. While agility is required, an over-reliance on opportunism can drown out the focus required to win. Today’s competitive landscape requires a critical eye to ensure organizational resources and attention are truly being allocated towards your common ambition. A rigorous prioritization exercise across a set of criteria (e.g., strategic, operational, and financial) will help ensure that the potential opportunity list is adequately refined into a pragmatic portfolio of strategic initiatives.

Summary: Benefits of a Business Strategy

Establish clear organizational objectives and strategic priorities to create a common direction and purpose.
Validate owners’ / managements’ market and operational beliefs to make fact-based decisions.
Communicate a clear vision, story and priorities with internal and external stakeholders.

Business Planning: Make it Tactical

A strategy is only as good as its execution. Gaining organizational buy-in and generating demonstrable results requires tangible activities, behaviours, and expectations to empower staff to effectively execute.

Garrett Bangsboll, Vice-President at Richter, explains it well: “A business plan is what helps bridge the organizational strategy into tactical execution.”

Engage the Business

Strategic planning tends to be a top-down process, but it doesn’t have to be. Stakeholder engagement throughout an organization can help identify challenges, uncover fresh perspectives, and drive employee buy-in as the strategy is implemented. If there was minimal engagement during development of the business strategy, stakeholder involvement during tactical business planning becomes more important. This engagement will help to validate and communicate the strategic priorities, understand different perspectives related to the execution activities, and flag any potential risks / concerns early on.

Translate the Priorities into a Roadmap of Activities

Knowing the strategic direction is critical, but translating it into discrete activities, which must be sequenced appropriately with clear resource allocation and accountability frameworks, is the path to success. Also known as an operational plan, the execution plan outlines how owners, executives and staff will prioritize their time, monitor and track progress and prepare for potential risks.

Strong executives and managers will reverse engineer the strategic priorities and objectives into tasks for staff to execute. This process should also incorporate the internal and external analyses findings to reflect market and operational realities. When complete, the execution plan should outline:

Detailed Action Items: Specific activities to achieve each strategic priority.
Timing: Specific start and end dates alongside key milestones, sequencing and dependencies.
Responsibilities & Accountabilities: Explicitly designate who is responsible for each action item to ensure role clarity.
Resources & Budget: Financial and human resources required for each action item and task.
KPIs & Metrics: Define the measure of success for each action item.
Risks & Mitigations: Potential risks or challenges that may impact the execution plan, supported by mitigation strategies or contingency plans.
Communications & Change Management: A detailed plan to share key updates, messages and implications with stakeholders and drive the change agenda as the execution plan progresses and milestones are achieved.
Review Cadence & Mechanism: Regular review cycles to assess progress, address issues or challenges and ensure continued alignment to the strategy.

Watch the Details, But Don’t Get Caught in the Weeds

Analysis-paralysis and over-engineered processes can hinder decision-making and efficient execution. Teams should collaboratively leverage their competencies and be empowered to contribute to the strategy and business plan. Ensure that the execution roadmap can truly serve as a valuable guide for managers and teams to understand and execute upon their specific roles within the organizational strategy. The roadmap should also validate that resource allocation is proportionate to strategic importance and organizational assets are not stretched too thin.

Summary: Benefits of a Business Plan

Translate the strategy into action.
Efficiently allocate organizational resources.
Clearly define activities, timing, milestones, responsibilities and accountabilities.

Budgeting: Quantify & Monitor

Most businesses have an established budgeting process; however, many inappropriately confuse this with either strategic planning or business planning.

A budget should reflect the outcome of management decisions made throughout the strategic planning process. It should also leverage the intent outlined in the corporate strategy and build upon the business plan by adding more financial granularity – investments, revenues, cost structure, expected return profiles – to the execution plan.

Ultimately, the budget should be an output of the strategic planning process, not the starting point.

Quantify & Validate

A budget should estimate investment requirements, ongoing cost base, and anticipated revenue uplift and return on investment of a company’s strategy. It should validate and reinforce the strategy and underlying business plan tactics by leveraging a set of defensible financial assumptions.

It is critical that a budget is developed with sufficient granularity to reflect the base business, as well as the identified strategic initiatives, in addition to appropriate segmentation across the business itself (e.g., departments / business units, geographies, products / services, channels, and customers). This approach supports a more robust assumption-driven modelling exercise – which should be underpinned by the data within the strategy and business plan – as opposed to aggregate-level yearly projections that may too often be arbitrarily based on gut feeling.

“The best budgets will go beyond the income statement and include a fully integrated or 3-way model. This allows the company to understand not only its plan for operating profits, but also the impact of its strategic plan on cash availability, as well as its general balance sheet health,” says Karen Kimel, partner at Richter.

By creating an integrated model, a company may discover that its strategic plan isn’t currently supported by its capital structure of available financing base. Understanding this in advance of execution will allow the company to properly plan for and seek any requisite support. Depending on the availability of financial resources, it may be necessary to alter or adjust the business plan. Often the budgeting process can help inform or refine the timing of executing various action items within the business plan.

Monitor & Report

Beyond enhancing the financial granularity of the business plan, a budget’s key role is to enable effective organizational tracking. This spans monitoring of progress / performance against business plan execution and management reporting across the business. Organizations often fall on one extreme of the management reporting spectrum – either too little / insufficient reporting or excess reporting for the sake of reporting, without a critical eye to actual insights and business value.

Roadmap milestones should align with timing of budget assumptions (e.g., investment timing, anticipated revenue uplift, etc.), and there should be coherence between ownership of strategic priorities, roadmap workstreams / activities, and those ultimately responsible for different parts of the P&L. Those who are assessed on the financial performance of the organization must have visibility, if not accountability, for their roles within the execution plan.

The effective monitoring and tracking of progress against the business plan enables organizations to capitalize on the momentum from early successes, react and pivot to challenges, and mitigate broader financial risk. This reinforces strategic planning as an organic process and how the business plan can remain a “living” document. It should adapt and evolve as in-market learnings take place during execution, with the budget as a key tracking tool.

Summary: Benefits of a Budget

Quantify the required investments and anticipated returns.
Accountability mechanism for managers and teams.
Enables ongoing tracking and management reporting / monitoring.

What’s next?

At Richter, we understand that companies have different approaches to creating their long-term plan. Understanding how your current process is designed and executed will serve as the starting point to enhance it based on the three layers of planning that we have outlined. Tying together your objectives, priorities, internal operational and external market dynamics, and financial allocations alongside detailed action items can be daunting, but the benefits are worth the effort.

Our team can help you assess your approach and apply the appropriate emphasis on each stage. We will ensure your strategy, business plan and budget are designed to accelerate your growth and ensure alignment across all aspects of your business.

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