Business Plan Versus Strategy

A perfected business plan and a business strategy are two very different tools. A business plan normally is prepared for a financing partner, either a bank or an investor. The purpose of the plan is to let investors know about the business and its potential for success in order to encourage them to invest in the business.

A business strategy is quite different and acts as a blueprint for your business. Rather than a document for investors, this is a plan for the owner to follow. It begins with an evaluation of the business' goals. Where does the business owner want the business to be in 5, 10 or 20 years, both in terms of fair market value and cash flow? What are the plans for exiting the business? Will it be sold to an outside party or to key employees, or will it be turned over to the owner's children? Next, we have to do a thorough evaluation of the current state of the business. This includes a valuation of the business and an evaluation of the business' strengths and weaknesses. The more thorough the evaluation, the better the potential outcome, but even a cursory evaluation is helpful.

Also included in the evaluation should be benchmarking. Benchmarking identifies areas in which a business is above or below the industry averages. This analysis can immediately identify areas of opportunity. Now we need to create a strategic plan to overcome the business' weaknesses and to use its strengths to create the desired value, cash flow and long term business growth. The valuation is the key to this process. By doing a current valuation, we can develop a plan that will use the principals of value in the valuation to build the value of the business.

Be sure that the reporting is set up to give you the information you need to make sure everything is implemented and running smoothly. Good reporting relieves much of the stress of running a business because you know what is happening and why it is happening.

Good reporting is also part of good internal controls. You must have internal controls in place, not only to prevent fraud and theft, but also to ensure that the work is being done in the way you expect.

Creating workable and efficient systems and procedures allow you to run the business by managing systems rather than managing individuals. With proper systems in place, you can build your business as large as you want while maintaining efficiency and high levels of profitability.

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