The answer is of course varied, but there are similarities in the response for large business CEOs and senior executives vs. small business owners and entrepreneurs.
In large businesses, the answer is generally some ethereal verbiage that sounds great, expressing corporate growth targets, commitments to employees, social responsibility, etc. However, those responses don’t really answer the question. When pressed, large company CEOs respond that there is a voluminous and extremely detailed plan (20 to several hundred pages) that is prepared on an annual basis to support their strategic plan, which is also prepared on an annual basis. When asked further about the plan, answers are frequently:
» It’s filed away to be used as a basis for next year’s plan.
» It’s only shared on a “need to know basis” with employees.
» It’s done to give the Board or investors confidence that management knows what they are doing.
With small business, the entrepreneur’s responses are even more interesting – it’s usually:
» Blank stare – entrepreneur never thought of it.
» Pie in the sky – going to be the next Facebook, but no idea how to get there.
» Not necessary – because this is the way the founder ran the business and he or she knows where they/we want to be.
Hopefully, you see the inherent problems with these types of responses. But don’t despair, there is a solution! You can develop and implement a one or two-page bullet point plan, consisting of:
» Objectives – 3 to 5 bullet points describing where you want the business to be at some future point in time – 5, 10 or 20 year. THESE SHOULD NOT CHANGE but be reviewed on an annual basis to confirm that you and your team are on track.
» Company will be the low-cost producer of a clearly defined technology, product or service.
» Company will be the dominate player in the industry with a clearly identified target market.
» Company will be the highest quality producer, with quality and products clearly defined.
The take away here is that each of these Objectives can be measured to see how you and your team are doing.
» Strategies – Develop at least two strategies to achieve each objective. Strategies can support more than one Objective and can change on an annual basis based upon your marketplace.
» Product design will use inexpensive material and be easy to produce.
» Company will develop IP to dominate the target market.
» Company will over design and use only the highest quality materials.
» Tactics – Develop at least two tactics for each strategy. These will become the driving force for the company for the next year. Tactics are flexible and can be changed. In other words, if a tactic is not working over a 3 to 6-month period, change it.
Caution should be used as Strategies are frequently confused with Objectives and Tactics are frequently confused with Strategies. Make sure you review and understand the differences.
Here’s a simple example that is easily understood:
» Objective – Drive from Atlanta to Los Angeles
» Strategy – Use interstate highway system
» Tactic – Take I-85 South to I-10 West
Unfortunately, in our experience at Commenda, most companies start with a strategy or tactic without knowing the objective. In the simple example if you just followed the strategy to use the interstate highway system, who knows where you would end up – Detroit, Boston, Chicago – but probably not Los Angeles. It you just used the tactic, you may stop in Dallas or Phoenix and never reach Los Angeles.
If you would like further information, or need help in developing your plan, please contact a member of the Commenda team. We can help with all three and can even help with capital to buy gas for the long drive.
Please feel free to contact me, Larry Bolterstein, with any comments or questions at LBolterstein@CommendaCapital.com or 678-481-3475 or any other member of the Commenda team who can be found at www.commendacapital.com.