Implementing Your Strategy is the Key to the Success of Your Business
All businesses need a product or service, that someone wishes to buy, at a price that derives a profit for the business
In addition, all businesses need to have 3 key areas covered if they are to develop a long term viable business model which maximises the prospect of success and minimises the business risks associated with under performance:
COMMON STRATEGIC GOALS
Strategic goals tend to include at least one of the following three objectives:
This involves strategies around maximising profitability from the current products and customers. The focus can be on sales and sales mix (‘winning new business’) as well as cost control.
Strategies to grow the business can involve winning new business and acquiring new businesses.
This can vary from putting in place a strategy to sell off part or all of a business assets or orchestrating a sale of the owner’s shares in the business.
THE STRATEGIC PLANNING PROCESS
When a business is looking to develop clear winning strategies, senior management need to make sure they have a good grasp of three things:
None of these three things are very difficult to grasp and many business managers are sent on training courses which extol the virtues and details of how to do these things.
THE COST OF NOT DOING IT RIGHT
Many business managers have implemented the strategic goals set out above. The issue for a small business owner or even a listed company is “Did they make the most of their opportunity?”
The cost of not doing it right is very high, albeit it is not often a number which shrieks at you from the top of the mountain. It is more the lost opportunity, the lost dollars which should have been in your pocket but instead, they stay in someone else’s. You don’t see it so you think it is all ok. Which it is if you don’t mind missing out on the payoff for all your hard work and effort.
When management is implementing a strategic goal, there is a benefit for the business but also for the business owners.
Let’s look at a simple example to give these words some substance.
Your sales were $10 Million and your profitability was $1 Million. A strategy to improve profitability will result in a profit uplift of 30% or $300,000. This is obviously good for the business. But the real benefit is for the owners of the business. If you are the owner of a privately owned company, your shareholding is worth somewhere between $3 Million to $8 Million more than it was. This increase in value reflects the commonly used multiplier range for privately owned businesses of between 3 to 8 times earnings.
However, if you only managed to increase profitability by 15% then shareholders ‘lose’ $1.5 Million to $4.0 Million in value.
For a listed company the multiples are even higher with a range of 10 to 30 times earnings not being uncommon so the cost for them not doing it right is even higher.
The question for most business owners is “What am I prepared to do to ensure I don’t miss out on this value ending up in my pocket?”
THE PROBLEMS WITH DEVELOPING & IMPLEMENTING A STRATEGIC PLAN
As with most things in life, it is ‘the doing’ which is more important than the theory. People ‘don’t ‘do’ for a number of reasons:
Theory is great but practice is better. Every thing you do for the first time is more difficult that first time. It is also time consuming to learn the ropes and learn the short cuts to make things quicker and more time and cost efficient. It gets easier if you were to do it regularly.
How often do you sell a business or buy a business? For most of us it is probably once or twice in our business life – but even that may be high.
As for winning new business, many businesses have had good success at gaining new clients by being in the right place at the right time. But how often have you been required to strategically think ‘outside the square’ to gain new clients, to develop new distribution channels.
Opportunistic wins with clients are great but it can be so much more rewarding financially to go out with a strategic mission to win new business.
Many business managers are very good at their day to day tasks. They are very good are working in their business. They have a deep understanding of their technical area of expertise and they love to do it – day in, day out.
On the matrix of Urgent and Important, where does strategy planning fit in to all of this? It is Important but generally Not Urgent.
As a result, strategic planning and the long term pay-off get put on the bottom of the in-tray and it only sees the light of day when pushed along by someone else.
Because of the first two points, it is often the case that in many businesses the time is not taken to communicate top down what is expected of the management team in clear, measurable terms.
This starts with the Board and works its way down the business. If a business wants to maximise the benefits to the business of a strategy, then a Board with teeth is the first step.
A Board with teeth will hold the CEO accountable for implementing the plan and it flows from there.
Many owner-operated businesses suffer because the owner (the Shareholder) is also the Board and is also the CEO. How do you rap yourself across the knuckles for non performance? The reality is you don’t and you, as a Shareholder, accepts excuses from you, the Board, who accepts excuses from you, the CEO, and so on down the chain of command. The smaller the business, the longer the line of excuses to yourself!
OVERCOMING THE CHALLENGES AND SUCCEEDING
As indicated at the commencement of this fact sheet, the strategy planning process is not hard but it is hard to do it on your own.
This is where bringing in an experienced, objective and unbiased business savvy expert can assist a business to achieve its strategy planning objectives – someone impartial who is paid to ‘sweat the detail’ of the strategy planning process, who has no turf issues’ and no power games’ to play who can often bring about consensus and support for ideas which might be radical and different from past practices and accepted levels of performance.
Their expertise and experience means they are not inventing the wheel for the first time and they are not tied down with day to day tasks which are the road blocks to success. And, they can pass on their knowledge and expertise to your management team so they can learn and take greater control over the implementation process – after all, it is your business and you want to maximise its success.