SMEs - Step 8 in the business planning process

This is the second last step in the planning process. The Step 8 efforts are a lot more detailed. Essentially there are three (3) components. The first is the marketing plan, followed by the human resource plan and financial plan.

They must be done in this sequence. Furthermore the marketing plan must produce the sales budget and cost of sales, while the last step is the financial plan where the fixed costs are applied to assess the profitability of the business. Remember not to fudge the figures.

These three components will be considered in more depth in a separate exercise in coming weeks.

SMEs - Step 6 in the business planning process

The sixth step is the SWOT analysis. Essentially this is an analysis of the firms strengths and weaknesses in the context of the PESTEL analysis.

Remember that not everything in the environmental analysis is relevant to your business.

PESTEL + Weaknesses = Threat

and

PESTEL + Strengths = Opportunity

The secret to the SWOT analysis is to be realistic and objective in your analysis.

SMEs - Step 5 in the business planning process

The last step in the corporate strategy is the environmental analysis, more commonly known as the PESTEL analysis.

This could arguably be done earlier in the corporate strategy process, and in fact should best be done as part of each and every step of the corporate strategy process. This environmental analysis is crucial to success, as these external factors are outside the control of management and consequently it is imperative that management are aware of their possibly impact on the corporate strategy.

Too often businesses become introspective and consequently fail to take cognisance of the external factors that surround their businesses, and then they later wonder what caused their businesses to fail.

For the uninitiated it is Political, Economic, Social/Cultural, Technological, Environmental and Legal environments which are to be monitored.

SMEs - Step 7 in the business planning process

The first six(6) steps are in essence, the corporate strategy of the firm. Step seven (7) onwards is the business strategy. This is the nuts and bolts, how it must be done strategy, in order to achieve the broader corporate strategy.

The second part of the business strategy, Step 7, is the setting of objectives. These are the specific items we wish to achieve in the current financial year. Objectives are distinguished by the fact that they have an expected completion date, and a measurable outcome. Ideally when setting objectives, the cost of achieving the objective must be measured against the value it will generate for the business, and if it shows a negative outcome, then it must be removed as an objective. Beware expending resources on objectives that add very little value to the firm.

Objectives must preferably be large, audacious and should generate a noticeably positive effect on the firm.

SMEs - Step 4 in the business planning process

Goal setting is normally focused on the 3 year (medium term) horison. (Remember that the timelines vary at times from author to author).

Goals are our medium term intentions, and they are required to provide us with more focus on what must be done in order to achieve our vision and mission in the longer term. These require a lot of thought as they provide the bridging between the business strategy and the corporate strategy.

Goals should not be too many in number, and should bridge the present and the future. They must be well thought out.

SMEs - Step 3 in the business planning process

So far you should have decided on a harvest strategy (Step 1) and on your business model (Step 2). In Step 3 we move to the next item that has to be addressed. Setting the Vision and Mission.

The setting of the Vision, Mission, Goals and Objectives must be seen as having a funnel effect, where the Vision is at the broadest part of the funnel, in other words the biggest picture on where the business is intended to get to in the far future, and the Objectives as the narrowest part of the funnel, the smallest picture on where the business is intended to get to in the short term future, normally considered the current financial year.

The Corporate Strategy would normally end at the completion of the PESTEL analysis (Step 5)and the Business Strategy would include Steps 6 through 11.

So to return to Step 3, the setting of the Vision and Mission. The Vision should look at where and what the enterprise wants to be in the far future. This will vary in time. Some enterprises think a 10 year horison is fine, while some, like the Japanese think a 50 year horison is fine.

The Mission statement is normally considered as a nearer term concept of where the business will want to be in say 5 years, bearing in mind that the strategy may involve enormous change in the enterprise which will evoke an evolving strategy.

Look at the following examples:

Toyota Vision
"To become the most successful and respected lift truck company in the U.S."
Toyota Mission
"To sustain profitable growth by providing the best customer experience and dealer support."

McDonalds Vision
"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."

McDonalds Mission
"To be our customers' favorite place and way to eat."

Hopefully this gives an insight into what a Vision and Mission statement should look like.