While strategic planning is often thought of as something reserved solely for big businesses, it is equally applicable — and even more critical — for small businesses. Unlike bigger companies that can afford to make a strategic error, a mistake at a smaller company can put it right out of business.
For this reason, failing to plan is literally planning to fail. By going through the strategic planning process, entrepreneurs define, refine and fully communicate the product or service for themselves. They learn to match the strengths of their business to available opportunities, enabling them to determine how their company is going to generate revenues.
Before you embark on the strategic planning path, however, there are a number of “strategic planning traps” to watch out for. Identifying and managing these challenges upfront is critical in creating plans that position your company for long-term growth.
Not Doing Strategic Planning
The biggest mistake entrepreneurs make is not doing strategic planning at all. Rather than looking at the long-range, big-picture, they focus on operational issues and day-to-day survival. They end up working harder not smarter. Having a clear strategic direction — where you want the business to be in five years, 12 months and 90 days — will enable you to allocate your time and financial resources more effectively and efficiently. The right competitive strategy can make up for many tactical errors, but no amount of effort can compensate for the wrong strategy.
Lack of Commitment to a Market or Strategy
Entrepreneurs are often unwilling to commit fully to a market or strategy. Start-up entrepreneurs especially tend to measure their success by the volume of activity. As a result, they have difficulty turning away opportunities that come their way and end up taking any jobs that come along. Thinking strategically means making choices both about what you want to be and don’t want to be. A company needs discipline to differentiate itself and create a competitive niche. The best approach: figure out the spot in the market where you can make the most money and then go for 80% of that niche.
Being Overly Optimistic
By their very nature, entrepreneurs have to be optimistic — otherwise, they would probably never start a business given the high rate of failure. But, putting on blinkers to potential pitfalls or gaps in your company’s strategy will not make them disappear. Being more realistic about your market, your company’s capabilities and your competition can only increase your chances of success. It is important to realise that there is a difference between negative thinking and critical thinking. Critical thinking is purposeful, reasoned and directed at increasing the probability of a desirable outcome. Critical thinking takes an unbiased view of the situation. This means looking at both the pros and cons. People that are overly optimistic only see the pros and naysayers only see the cons. Critical thinking attempts to balance the two to arrive at a more reasoned decision So, the strategic planning process should seek to uncover possible risks and challenges, not simply highlight the benefits. Taking a serious look at why a strategy might not work makes it possible for your company to take proactive, preventive action to avoid anticipated stumbling blocks. On the other hand, being overly optimistic about the wrong strategy can only make your venture fail — faster and harder. So, the key is to be realistic in developing the strategy and to be optimistic in implementing it.
Not Making the Strategy Concrete
It’s not enough to come up with the ideas in your strategic planning sessions and then hope they will be put into place. The plan needs to be put in writing. The difference between having a plan and having a written plan is significant Once the plan is written down, you need to make sure it does not gather dust on the bottom of the bookcase. People do not need to refer to the plan daily, but it should serve as an umbrella to guide day-to-day behaviour. The only way it can do that is if it is translated into specific, measurable goals, objectives, and action plans. Once this is done, you need to communicate the plan fully to all employees and make sure they understand it and what is expected of them in reaching the goals. Lastly, to make sure the plan remains realistic and effective, it must be continually monitored, evaluated and updated. Changes in the business landscape can alter any business plan. Staying on top of what’s going on internally and externally will help make sure you stay on the right course.
Not Involving Others in the Planning Process
Too often, entrepreneurs think they know everything they need to know about the business — so why involve others in the planning process. Entrepreneurs also believe that because they are taking the risk, not the employee, why should the employee be involved in deciding what direction the company should take. However, involving others in the process makes the plan more strategic and better poised for success. People have a variety of experiences and look at things in many different ways. Bringing multiple perspectives to the table is vital in uncovering potential challenges and pitfalls In addition, by involving others in the process you gain their support. Employees like — and need — to feel that they can make a difference. Soliciting their input and ideas will make them a valuable part in creating the plan and implementing it. They will be energized to put forth their best effort to reach the stated goals and objectives.
Putting it all Together
Starting a new business is hard enough. In fact, 80% of businesses fail within the first five years. But, you need not fall into this category. Taking a strategic, but not negative, look at your business will enable you to develop a plan that will position you for future growth — and make you a survivor.