Why Create a Strategic Plan and Financial Forecast?
The answer to this question is focus and goals. Strategy creates context for operating decisions. It establishes the playing field and provides guidance for decision-making, the experience and skills needed by employees, positioning of marketing and advertising, the priority of initiatives, how to structure the company, and a many other issues.
A plan is necessary to guide decision-making, channel resources, set goals and define direction. Because of that, building a strategic plan should be well worth the time it will take to develop it.
Strategy is the way in which a company meets its ongoing challenges and opportunities. It is often an overused and misunderstood concept. Strategic thinking does not necessarily imply long term.
Strategy is a set of choices that defines the nature, direction and value system of an organization. It is a mindset which should be understood by every person in the organization and used to guide all decision-making within the organization. In developing strategy, leaders make conscious and informed choices about who they are and what they stand for:
- What are our core values and beliefs?
- What markets and customer groups will we serve?
- What products and services will we offer and how profitable is each one?
- What competitive advantages will cause us to succeed?
- What core competencies must we have to fuel our growth?
- How will we sell our products and services?
- How will we market our products and services?
- What infrastructure, core processes and resources must we have to succeed?
- What financial results will we achieve?
Next, and the hardest part, is plan implementation. Research in the last several years has pinpointed many reasons why business plans fail, including the following:
- Poorly Understood Strategy – Most companies have a strategy but, according to one study, fewer than 5% of their employees know what the strategy is.
- Weak Strategy Execution – Studies show that up to 90% of strategies fail due to poor execution.
- Inability to Adapt to Change – Once a business makes plans, the chaos of everything changing around it may gradually erode those plans unless the organization can adapt. Many cannot.
- Lack of a Systematic Approach – Discipline is needed in all size companies.
- People are Not Engaged – An engaged worker is one who is personally committed to the goals of the company. Unfortunately, 90% of the time what passes for commitment is compliance. If you cannot get people engaged, no improvement will last.
- A Gap Between Knowing What To Do, and Doing It – Many things can get in the way including substituting talk for action, employee fear or mistrust of management, using the firm’s history instead of sound judgment to dictate action, and badly designed or complex measures.
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5ivestar Business Services are tax agents located in Carina Heights on Brisbane’s Southside. We service all areas of Brisbane, Ipswich and the Sunshine Coast for tax, BAS and bookkeeping. We also practice as virtual CFOs, take on interim CFO engagements as well and financial management, reengineering and restructures including business turnarounds and transformations and expert financial modelling.