Issue #27 February 2013

Business plans - a total waste of time?

According to a colleague who owns and operates his own consulting business, business plans are “a total waste of time”. As his business has operated both profitably and successfully without any formal business planning process for well over two decades, perhaps he has a point. Well, maybe.
While a formal business plan is the most effective way to guide your overall strategic management process and communicate this process with your team, it is possible for an organisation to implement a strategic management process without a formal business plan, but probably not the best way of doing it.

Strategic management is defined as an ongoing process that evaluates and controls the business and the industries in which the company is involved. It is a process that assesses the business’s competitors and sets goals and strategies to meet all existing and potential competitive threats. Each strategy is then reassessed annually or quarterly (regularly) to determine how effectively it has been implemented and whether it has succeeded. The current strategy could need to be replaced by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment or a new social, financial or political environment.

Why is it that some businesses do not see value in a formal business planning process or think strategic management is not relevant to their needs?

I think there are two main issues that drive reluctance by small business management to accept a strategic management approach:
1. The business has succeeded in terms of generating consistent profit without developing a long-term strategic outlook, and there is limited awareness of the need for or value of developing strategic management processes.
2. There is some awareness that operational activities and procedures are not that efficient but, so long as the businesses is succeeding financially, there is limited motivation for change and equally limited interest in making the resources available to manage this change.

So why should businesses become involved in a strategic management process, including the development of a comprehensive business plan?

Once your business reaches a size where management responsibility must be delegated, then your management team must be working together on a plan that is targeted to achieving an agreed set of corporate goals over a specific time. They must also have the tools to manage and monitor the implementation of that plan.  Without an effective strategic management process to guide this, things can get very complicated.

Realistically, all businesses need some form of business plan, tailored to their operational needs. Importantly, there is no “one size fits all” formulaic approach to the business planning process as - like people - every business has different needs, capabilities, available resources and ambitions. A good business plan is not about complexity or cost, but about how effectively it allows the business to implement the strategic management process. 

If you want to discuss the strategic management process and your business planning requirements, please feel free to contact us.

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