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Do I need a business plan and a strategic plan?

What’s the Difference Between Business Plan & Strategic Plan?

 

                                       

Your business is never too mature to update its business plan and if you are growing must update its strategic plan every quarter.

 

William E Rothschild once said, “What do you want to achieve or avoid? The answers to this question are objectives. How will you go about achieving your desired results? The answer to this, you can call strategy.” These words provide a nearly exact description of the differences between the business plan and the strategic plan.

The Business Plan

The business plan provides a written tour of your business’ operations.

This comprehensive plan includes the owners vision, purpose, values, standards, culture and ethics as well as the business’ model, its mission and objectives.

It then prescribes the staffing, location, infrastructure and software, marketing and financing requirements needed to meet those objectives.

The business plan examines and articulates 3 things

1.             the business’ potential for success,

2.             the competition, and

3.             identifies the business’ critical success factors that comprise it’s competitive advantages.

 In a detailed and organized manner, it reviews and explains every area of the business.

The Strategic Plan

The strategic plan describes the how.  It identifies the

1.             capabilities required to implement the business plan,

2.             steps, or strategies, that the business will use to meet, if not exceed, its objectives. The strategic plan can focus on the entire business or specific areas of the business, such as consumer marketing, customer retention and product introduction. As a result, businesses can have many strategic plans to address various areas of business.

3.               the who.   Each step, strategy or capability must be tied to one person in the business who will be accountable for the implementation and success of that strategy.

‘How’ is affected by the external environment.  A business that fails to adjust its ‘how’ will become a dinosaur.

Do I need both?

 

Some people explain that business plans are used for new companies and strategic plans are used for experienced and established companies. This is untrue. Business plans can be used by companies of all ages. Mature businesses often review their business plans annually to benchmark progress and verify that the business is on course to success. Business plans are used, at every business-maturity level, to obtain loans, secure partnerships and attract the interest of corporate executives. Similarly, strategic plans can be used by young businesses to develop competitive advantages, solidify operations and secure customer satisfaction. These plans are also beneficial in securing investors because they clearly define the steps and procedures that will be taken to achieve the defined results.

What comes first?

 

The business plan determines what you want to achieve and determines the boundaries of the strategic plan. The missions and objectives within the business plan not only define the desired results, but the time frame in which the results should be achieved. It tells the amount of resources, staff and finances that are available. The strategies in the strategic plan are developed around those criteria while introducing new areas and information that is needed to attain the desired results.  The strategies define how staff money and other resources must be allocated.

 

Things to consider

 

It is important that you review and update your business plan (objectives) at least once each year. Regular review of your business plan will help you to judge your business success, identify necessary changes and resolve issues before they develop into disasters. A regular business plan review will also help you to develop strong business forecasts for your business, especially when the information is updated monthly.

Your strategic plan on the other hand must be adjusted more frequently.  This is more and more important as the external environment in which a business operates changes increasingly rapidly.  While a complete overhaul of strategies may be unnecessary, it is essential to frequently monitor and adjust ‘how’ you are working to achieve the objectives.

The faster you are growing the more frequently your business and strategic plans should be revisited.

 

Factors that make up a business’ External Environment

 

The external environment of a business are those factors outside it that affect it’s ability to function. Some external elements can be manipulated by marketing, while others require the business to make adjustments. Monitor the basic components of your business's external environment, and keep a close watch at all times. The external environment is changing more rapidly now than ever before so vigilance is needed to ensure your competition doesn’t see the opportunities before you do.

 

 

 

Customers

Your customers are among the external elements you can attempt to influence, via marketing and strategic release of corporate information. But ultimately, your relationship with your clients is based on finding ways to influence them to purchase your products. Market research is used to determine the effectiveness of your marketing messages, and to decide what changes can be made to future marketing programs to improve sales.

Government

Government regulations in product development, qualifications of professionals, packaging and shipping play a significant role in the cost of doing business and your ability to expand into new markets. If the government places new regulations on how you must package your product for shipment that can increase your unit costs and affect your profit margins. International laws create processes that your business must follow to get your product into overseas markets.

The Economy

As with the majority of the elements of your business's external environment, your business must be efficient at monitoring the economy and learning how to work with it, rather than trying to manipulate it or blaming it for your results. Economic factors affect how you market products, how much money you can spend on business growth, and the kind of target markets you will pursue.

Competition

Your competition has a significant effect on how you do business and how you address your target market. You can choose to find markets that the competition is not active in, or you can decide to take on the competition directly in the same target market. The success and failure of your various competitors also determines a portion of your marketing planning, as well. For example, if a long-time competitor in a particular market suddenly decides to drop out due to financial losses, then you will need to adjust your planning to take advantage of the situation.

Public Opinion

Any kind of business scandal can be damaging to your business’s image. The public perception of your business can hurt sales if it's negative, or it can boost sales with positive news. Your business can influence public opinion by using public relations professionals to release strategic information, but it is also important to monitor public opinion to try and defuse potential issues before they begin to spread.

 

Technology

Technology used to be lumped in with government……. Those days are long gone.  The use of technologies (software, tools, for manufacture, delivery, customer experience etc) is a major differentiator between businesses.  And plays a significant role in either the success or failure of business.  It must be a central consideration in the creation and design of your business model.     A change (minor or major) in delivery mechanism for a service can mean a major competitive advantage.

 

For a complimentary Strategic Discovery Session to uncover your strategic success factor email  bridget@creatingwhatmatters.co.nz

 

 

 

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