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.

SMEs - step 1 in the business planning process

Once you have a basic idea of which new business you wish to start up, give a thought to your harvest strategy.

Firstly, remember that the reason for creating a new business is to create wealth for yourself, not to create a salary. The salary is simply the reward for the work you do as an employee of the business. The wealth is the reward for being an entrepreneur and taking the risk in starting the business.

But so long as the business is being run by you, it is highly unlikely that you will be able to extract the wealth you have created.  The best way to extract the wealth is to sell the business. This simple fact is one that many entrepreneurs and business owners often miss.

So before you start a business, decide what your harvest  strategy is for the new business. Who will buy a business of this sort? What basis will they value the business on? What profit and turnover levels will you have to achieve to be able to extract the amount of money you want in the selling price? Remember that the selling price is a function of turnover, profit and sometimes assets. It is not a figure you suck out of thin air. 

So understand the process and plan accordingly, and if the business cannot give you the required selling price in the allotted time, decide whether you want to proceed, or whether you want to find a different business. 

SMEs - step 2 in the business planning process

The second step in preparing a business plan for an SME is the business model.

The business plan requires you to define what you intend to sell to whom, and how you intend to do so, with the intention of making a profit. This sounds simple but can be complex in a business with many divisions or products.

Take the example of a computer store. Is the core profit of the business achieved through selling the product or through servicing the product and the client once the warranty has ended? It is important to know this, so that appropriate pricing and marketing strategies are defined and applied in advance.

The business will fail if both sales and service both discount their prices in the mistaken belief that the other is making the business' profit. So the model is an important component in assessing the future viability of the business.