Strategic Planning Workbook

Transcription

1 Strategic Planning Workbook

2 Table of Contents Introduction...2 Objective...2 What Is a Strategic Plan?...2 Developing Your Plan...3 Step One: Getting Started...3 Step Two: Where Are We Now?...4 Step Three: Where Are We Going?...7 Step Four: How Will We Get There?...10 Step Five: How Much Will It Cost?...11 Resources...12 Strategic Plan Template...13 This document was written for Feed the Future Partnering for Innovation by Roger Bird. Roger is an experienced banking and financial specialist with more than 30 years of experience. For the past 19 years, he has played an instrumental role in emerging economies to improve access to credit for small- and medium-size enterprises and the agricultural sector. He has created sustainable lending operations, designed and implemented credit and credit guarantee programs, and leveraged local and foreign private capital for financial institutions and private businesses. For more information on this workbook, please contact Feed the Future Partnering for Innovation at innovation@fintrac.com. 1 Feed the Future Partnering for Innovation Strategic Planning Workbook

3 Introduction Objective This workbook guides you in the development of a thoughtful plan that is clear, concise, and operational, specifically relating to the product, service, or technology supported by Feed the Future Partnering for Innovation. Planning is an integral part of good management period! Without planning, there is no direction, no corporate unity, and no measurement of purpose. Entrepreneurs generally understand the reason and maybe even the benefits of formal planning, but few actually do it unless forced to by bankers, investors, or partners. Business plans, strategic plans, operational plans, and financial plans are some of the more common tools used to guide businesses. Each has a targeted purpose; however, the focuses vary widely. Partnering for Innovation understands the importance of planning and wishes to offer its partners this practical approach to strategic planning. This approach is not a replacement to your company s comprehensive planning but rather an abridged version that can assist you to unlock growth and provide feedback measurements that enhance future business decisions. What we offer in this workbook focuses on scaling the product, service, or innovation supported by Partnering for Innovation, not a strategic plan for your entire organization. What Is a Strategic Plan? Strategic planning is a management activity used to: Identify and set priorities Establish agreement around intended outcomes/results and ensure employees and other stakeholders are working toward a common goal Determine needed resources and focus their allocation to strengthen operational efficiencies Assess and adjust the organization s direction in response to a changing environment A disciplined effort produces fundamental decisions and actions that shape and guide an organization for future growth by focusing on what it is, who it serves, what it does, and why it does it. Effective strategic planning articulates not only where an organization is going and the actions needed to make progress, but also how to measure its success. There are many different frameworks and methodologies for strategic planning, and there are no absolute rules regarding the right framework. Your plan should cover a minimum period of three years, preferably five. The workbook s approach breaks the strategic planning process into four key questions: Where Are We Now? Where Are We Going? How Will We Get There? How Much Will It Cost? Most entrepreneurs skip steps one and two typically as the company s visionary, they think because the plans are clear in their minds, they are also obvious to everyone else. However, if entrepreneurs take the time to establish clarity on the product s purpose in the marketplace and learn lessons from the strengths, weaknesses, opportunities, and threats (SWOT) analysis, they will expand their vision and strengthen their team s knowledge. It is impossible for a team to take ownership of a product s success without understanding its purpose and value. In addition, the time spent in step one and two help to hone and prioritize the elements of steps three and four. Feed the Future Partnering for Innovation Strategic Planning Workbook 2

4 Developing Your Plan Step One: Getting Started Getting Started Where Are We Now? Where Are We Going? How Will We Get There? How Much Will It Cost? The first task is to make a plan. It may sound crazy, but the first step is to make a plan to guide the strategic planning process. Determine who will be involved, what their contribution or role will be, and how much time is needed to complete the plan. Without the strategic planning process becoming a part of the daily work routine, people tend to leave these activities to the last minute and miss deadlines, which drags out the process, reduces the value of the plan, and lowers the final product s quality and usefulness. The best person to lead the planning team is the owner or general manager. Others may be chosen for the role; however, a senior level person is usually best qualified to express vision, direction, policy, and structure. Be careful to not be too rigid. Other team members need to be free to think creatively and make contributions, otherwise the process takes a top-down approach rather than ensuring the entire team has not only understood the plan but has embraced it. Bring enough people into the process to capitalize on various skills and expertise, but not so many that it functions like a committee and not so few that limit available expertise. Planning members might include: Owner/general manager Product development manager Marketing specialist Accountant/financial analyst Communications manager The team should meet once per week to discuss ideas, progress, and challenges. Each meeting should close with actionable items for each party to report on at the next meeting. Be sure to assign a note taker to capture meeting discussions, track tasks, and keep members informed. A realistic timeline to complete a plan might be six to eight weeks, depending on workload and team focus. 3 Feed the Future Partnering for Innovation Strategic Planning Workbook

5 Step Two: Where Are We Now? Getting Started Where Are We Now? Where Are We Going? How Will We Get There? How Much Will It Cost? Step two has two parts. First, your entire team needs to be clear about why this product or service is important in the world. If you are going to scale it, it must be, right? Second, take a hard look at the internal and external strengths and weaknesses. These factors will affect the product s ability to move forward and timing for scale. Part One: Prepare a Purpose Statement for the Product or Service As you think about the current status of your product, technology, or program under your agreement with Partnering for Innovation, first make sure both you and your team are clear about the objectives and purpose of the partnership. Then, write a one or two sentence statement that describes your product or program s purpose the reason you launched the product, why it is important, and why it matters to the world. This clarifying statement gives your entire team a common purpose to rally behind. This is not a description of features and benefits of your product or service, or profit contribution to the company, but a statement of value for why the world needs your product or service. A clear mission or purpose shows what you and your team are really committed to. Note: For additional assistance in preparing your purpose statement, refer to Resource #1 at the end of this workbook. Part Two: Prepare a SWOT Analysis SWOT Analysis (state your mission statement or purpose here) Strengths Opportunities Weaknesses Threats INTERNAL EXTERNAL Feed the Future Partnering for Innovation Strategic Planning Workbook 4

6 SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats. When assessing your strategic position, these elements are essential. You want to build on your company s strengths, shore up the weaknesses, capitalize on opportunities, and recognize threats. Remember, this strategic plan focuses on the product, service, or technology that Partnering for Innovation is supporting. However, in this section, it is important to include overall strengths, weaknesses, opportunities, and threats of the company as it relates to your specific product or service. Many managers are familiar with conducting a SWOT analysis; however, few entrepreneurs involve their team or invest the time necessary to produce a valuable analysis. A well thought out SWOT analysis will significantly improve your strategic plan and support its preparation. Note: Strengths and weaknesses are internal to your organization, while opportunities and threats are external to your organization. Strengths Strengths describe the positive attributes, tangible and intangible, that are internal to your organization. They are within your control. Weaknesses What do you do well? What resources do you have? What advantages do you have over your competition? Strengths can include the positive attributes of the people involved in the business, including their knowledge, contacts, reputations, or the skills they bring. Strengths also include tangible assets such as capital, equipment, credit, customers, channels of distribution, copyrighted materials, patents, information and processing systems, and other valuable resources within the business. Strengths capture the positive aspects internal to your business that add value or offer you a competitive advantage. This is your opportunity to remind yourself of the value that exists within your overall company, in addition to the specific product, service, or technology that you are scaling up. Note the weaknesses within your business. Weaknesses are factors that are within your control that detract from your ability to obtain or maintain a competitive edge. Which areas might you improve to accomplish your objectives? They might include: Lack of expertise Limited resources Lack of access to skills or technology Inferior service offerings Poor location of your business Weaknesses capture the negative aspects internal to your business that detract from the value you offer, or place you at a competitive disadvantage. These are areas you need to enhance in order to compete with your best competitor. The more accurately you identify your weaknesses, the more valuable the SWOT will be for your assessment. 5 Feed the Future Partnering for Innovation Strategic Planning Workbook

7 Opportunities Opportunities assess the external reasons for your business to exist and prosper, including opportunities that exist in your market, or in the environment, from which you hope to benefit. These opportunities reflect the potential you can realize by implementing marketing strategies. They may be the result of: Market growth Resolution of problems associated with current situations Positive market perceptions about your business The ability to offer greater value that will create a demand for your services If relevant, place a timeframe around the opportunities. It will help when you move to steps three and four. Does it represent an ongoing opportunity, or is it a window of opportunity? How critical is your timing? Note: Opportunities are external to your business. If you have identified opportunities that are internal to the organization and within your control, you will want to classify them as strengths. Threats What factors are potential threats to your business? Threats include factors beyond your control that could place your marketing strategy, or the business itself, at risk. These are also external you have no control over them, but you may benefit by identifying them, which allows developing contingency or risk mitigation plans to address them, should they occur. A threat is a challenge created by an unfavorable trend or development that may lead to deteriorating revenues or profits. Common threats include: Competition existing or potential Intolerable price increases by suppliers Governmental regulations Leap frog or new technology that makes products, equipment, or services obsolete Economic downturns Negative media or press coverage Counterfeit products What situations might threaten your marketing efforts? Get your worst fears on the table. Part of this list may be speculative while still adding value to your analysis. It may be necessary to classify your threats according to their seriousness and probability of occurrence. The better you are at identifying potential threats, the more likely you can position yourself to plan for and respond to them. You will be looking back at these threats when you consider your contingency plans. The internal strengths and weaknesses, compared to the external opportunities and threats, offer additional insight into the condition and potential of the business. How can you use the strengths to take advantage of the opportunities ahead and minimize the harm that threats may introduce if they become a reality? How can you minimize or eliminate weaknesses? The true value of the SWOT analysis is to bring this information together, to assess the most promising opportunities, and identify the most crucial issues. Note: For additional assistance in preparing your SWOT analysis, refer to Resource #2 at the end of this workbook. Feed the Future Partnering for Innovation Strategic Planning Workbook 6

8 Step Three: Where Are We Going? Getting Started Where Are We Now? Where Are We Going? How Will We Get There? How Much Will It Cost? What are your goals? When you look back three to five years from now, what will you want to have achieved? This is the opportunity to close your eyes and dream of where you will be in the future. The real value in this part of the plan is that you not only set your objectives or goals, but you also set measurable benchmarks to evaluate your progress as you implement your plan. In other words, you quantify a performance objective with a specific time period for it to be reached. This is often referred to as SMART objectives, outlined below. Specific: Explicitly define your goals. Ask how much and what kind with each goal. Measurable: If you do not state goals in quantifiable terms, then they are only good intentions. Measurable goals facilitate management planning, implementation, and control. Example: A measure might be number of new customers or percent complete. The target might be 500 new customers or a100 percent increase. Attainable: While goals should inspire people to aim higher, they must also be achievable. Set goals that you and your team can realistically reach. Responsible person: Assign goals to a person or a department. While specific people have the assignments, they are not solely responsible. They are the point people who will ensure that the team achieves the goal. Time bound: Your goals must include a timeline of when they should be accomplished. 7 Feed the Future Partnering for Innovation Strategic Planning Workbook

9 Here are some examples to help explain SMART objectives: SMART Objectives Objective Year 2016 Year 2017 Year 2018 Financial Achieve product sales growth of 50% over previous year. (Measure: product sales y2 y1 product sale y1 = 50%) Achieve product sales growth of 20% over (Measure: product sales 2017 Product sales 2016 product sale 2016 = 20%) Increase gross profit margin by 3%. (Measure: GPM 2016 GPM 2015 = 3) Market Increase # of distributors by 10% over the next 12 months. (Measure: # distributors 2015 target: 1.2%.) Achieve one million clients served. (Measure: total clients purchasing product.) Customer Realize 10% of the company s annual sales from the small business market by end of year 3. (Measure: # of small business clients / total clients.) Reach a 15% annual increase in new customers by end of year (Measure: % increase in new customers/target: 15%.) Internal processes Reduce the time lapse between order data and delivery from 6 to 4 days by June. (Measure: # of days to process each order/target: 4 days.) Feed the Future Partnering for Innovation Strategic Planning Workbook 8

10 Identify the right measurement. Most of your objectives that identify where you are going should have measures associated with them. The cornerstone of your strategic plan is the ability to measure progress. Assign someone within the strategic planning team to ensure that each objective meets the test of measurability. Suggested forms of measurement include: 1. Establish increments that mesh with the targets. Make sure to get the right timeframe and size of measures. For example, if your target is a 10 percent increase in sales over the year, break the target down to a monthly number. Try to use the same increments for all your measures. For example, if you are reporting monthly, then use monthly measures. 2. Identify the data source. Clearly identify where the monthly number is coming from and who is responsible for reporting it. Be sure that the measures are easily accessible. 3. Input numbers monthly. Enter numbers every month for each measure. 4. See the big picture. The primary purpose of key indicators is to give you a big picture look at the organization with a relatively small amount of information. If you are not seeing the big picture, change the measures. A great way to get a visual is to produce a chart or graph for each measure. The following chart offers common forms of measurement. This is not an exhaustive list, and they may not be directly relevant for your particular business, but they can help explain how to prepare Step Three of your strategic plan. A List of Common Measures Financial Customer Internal Business Processes Employee and Learning Net sales (dollar growth and percent increase) Gross profit margin Pretax earnings (dollar growth and percent increase) Operating expenses (SGA) as a percent of sales Receivables turnover Inventory turnover Debt-to-equity ratio Total equity dollars Operating cash flow Investing cash flow Financing cash flow Ending cash Earnings per share ROI, ROE, ROA Improving image/ reputation Number of customer complaints Percentage market share Number of customers retained Customer satisfaction Dollars per account Time spent with customer Revenue per customer Number of transactions per time unit Average sales dollars per transaction Customer satisfaction index Number of customers Number of new customers Ratio of new to existing customers Average sales per customer Percentage operating costs Billable efficiency Quality of product/ service Defects ratio New product success rate Cycle time to deliver Project turnaround time Number of defects or returns Delivery times Delivery response time to customer Number of test market trials Relative product quality Number of new products Number of products produced Average cost per product Number of products sold Employee retention Employee satisfaction Number of quality resumes on hand Employee turnover Number of ideas in the pipeline Number of employee suggestions Percentage of employees who are systems efficient Average sales per employee Number of net new positions Number of relevant trainings attended Source: OnStrategy. Phase 3: Strategic Plan Development. 9 Feed the Future Partnering for Innovation Strategic Planning Workbook

11 Step Four: How Will We Get There? Getting Started Where Are We Now? Where Are We Going? How Will We Get There? How Much Will It Cost? Knowing how you will reach your vision is the heart of your strategic plan. It is where the rubber hits the road, and it can be the most time consuming. This is because there can be a number of routes from your current position to your vision. Picking the right action determines how quickly or slowly you get to your final destination, and it can also affect the costs. In your objectives, you outlined your strategy where you want to go. In this section, you will answer How will we get there? by determining what specific actions you will take. These actions or tactics detail how you will achieve the objectives you created in Step Three. Consider this the physical act of doing something. Tactics often have to be flexible, because conditions change and you will need to stay the course or make adjustments. If you know where you want to go, your tactics simply involve working out the most practical, simplest, and cost effective route from where you are to where you want to go. For example, if you want to expand your market to a new region, you may need to hire a new sales manager or assign someone to travel and establish new distributors. Maybe you want to reduce your transportation costs by purchasing your own trucks and driver or outsourcing your transportation to reduce fuel and maintenance costs. Using your results in Step Three, identify tactical actions to meet that objective. This Strategic Plan Summary template shows how to ensure that all team members are clear on their roles, tasks, and implementation timing. Strategic Plan Summary (Examples) Where are we going? (Objectives) How will we get there? Responsible Person (Who) Due Date (When) Status Reduce office supply costs by 10% by the end of the 4th quarter Increase customer satisfaction by 5 points by 20xx Perform audit of supply costs for last 24 month Perform audit of supply usage for last 24 months Identify person(s)/ department(s) with high supply usage Evaluate supplier agreements Perform customer focus group Drill down on current satisfaction data Jack Smith March 15 Completed Diane Jones March 15 Completed Diane Jones April 1 Completed Jack Smith April 30 In process Stacy Jones January 15 Completed Stacy Jones February 1 Completed Develop improvement plan based on data Mark Thompson Stacy Jones March 15 Completed Meet with managers and help them develop action plans to address issues Mark Thompson Stacy Jones March 30 Completed Feed the Future Partnering for Innovation Strategic Planning Workbook 10

12 $$ Step Five: How Much Will It Cost? Getting Started Where Are We Now? Where Are We Going? How Will We Get There? How Much Will It Cost? Congratulations, you are down to the final piece of your strategic plan. All that remains is a confirmation that your plan meets your financial expectations and is within your financial capacity. The tactics or action items from Step Four give you the roadmap to reach your objectives. These items will affect both income and expenses, and you will want to capture the timing of the costs of these actions in your financial plan. Project the income and expenses associated with each tactic. Remember, these are the income and expenses associated with the produce, service, or technology under your agreement with Partnering for Innovation. This section can be confusing because most companies have multiple products (income and expenses outside of Partnering for Innovation) and many costs (e.g., overhead) has overlap between one product line and another. This is where you simply choose how to split or allocate these costs. There are no right or wrong choices; just keep in mind that you want as realistic a picture as possible of the product s financial viability. For example, you may want to apply an overhead allocation to this product s budget to account for administrative costs that are shared throughout the company. The benefit of isolating a budget for this new product, service, or innovation is that you ll gain valuable insight within your strategic plan on: The costs associated with each tactic or activity identified in Step Four The number of months needed until your tactics bring your product above break-even The amount of capital investment required to scale your product to profitability Cost-benefit and needed priorities of your tactics in Step Four Most likely you have an accountant who is skilled at preparing budgets, projections, and financial plans. You are free to use any financial worksheets or budgeting tools with which you are most familiar. Within the resources section there are budgeting template options. These are offered for those looking for budgeting guidance. Be sure to include an accounting expert throughout the entire strategic planning process. This is critically important because they can help build appropriate financial models that capture the associated costs to implement your plan and estimate the timing of your expected sales or income. This financial budgeting section identifies the costs and timing of expenses associated with each activity. Wherever possible, create a dashboard of assumptions within your worksheets to allow what-if analysis on the tactics you identified in Step Four. Note: For additional assistance in preparing your financial plan, refer to Resource #3 at the end of this workbook. 11 Feed the Future Partnering for Innovation Strategic Planning Workbook

13 Resources Resource #1: Vision If you are stuck on figuring out the purpose for your or your organization s work, which is not uncommon, check out some resources from Simon Sinek on identifying the why. He presents this from both a personal level and a corporate level, helping you to articulate the why your company exists. There are a number of resources available on this website: com/home.aspx Resource #2: SWOT Analysis See Strategic Plan Template on page 14. Some helpful web videos: Putting your SWOT Analysis to work: How to prepare a SWOT Analysis; Turn Weaknesses into Strengths by Updating Your SWOT: Resource #3: Budgeting Budget Template: Found on pages An interactive version can be found on the AgTechXChange: Resource #4: Strategic Planning For further information on preparing a strategic plan, there are a number of resources available on the web. You will find small differences in the approaches, and again, there is no right or wrong method. The website helps companies learn and prepare strategic plans and there are many others. While we do not promote our support any company or owners of this website or others, you and your team may find helpful videos and information in deepening your understanding of how to prepare you strategic plan. There are a number of free learning videos: Feed the Future Partnering for Innovation Strategic Planning Workbook 12

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15 Strategic Plan Template Strategic Plan [Date] I. The Strategic Planning Team (make a plan) Name Title Role Planning Team Leader SWOT Analysis Marketing Budget Other Start Date: First Draft Completion Date: Final Completion Date: II. Current Analysis (Where are we now?) a. Purpose Statement b. SWOT Analysis SWOT Analysis (state your mission statement or purpose here) Strengths Opportunities Weaknesses Threats III. Objectives or Goals (Where are we going?) IV. Tactics (How will we get there?) V. Budget (How much will it cost?) Feed the Future Partnering for Innovation Strategic Planning Workbook 14

16 Budget Template Notes on Preparation of Profit and Loss Projection You should change Product 1, Product 2, etc. labels to the actual names of your sales categories. Enter sales for each category for each month. The spreadsheet will add up total annual sales. In the % columns, the spreadsheet will show the % of total sales contributed by each category. COST OF GOODS SOLD (also noted Cost of Sales or COGS): COGS are those expenses directly related to producing or buying your products or services. For example, purchases of inventory or raw materials, as well as the wages (and payroll taxes) of employees directly involved in producing your products/services, are included in COGS. These expenses usually go up and down along with the volume of production or sales. Study your records to determine COGS for each sales category. Control of COGS is the key to profitability for most businesses, so approach this part of your forecast with great care. For each category of product/service, analyze the elements of COGS: how much for labor, for materials, for packing, for shipping, for sales commissions, etc? Compare the Cost of Goods Sold and Gross Profit of your various sales categories. Which are most profitable, and which are least - and why? Underestimating COGS can lead to under pricing, which can destroy your ability to earn a profit. Research carefully and be realistic. Enter the COGS for each category of sales for each month. In the % columns, the spreadsheet will show the COGS as a % of sales dollars for that category. GROSS PROFIT: Gross Profit is Total Sales minus Total COGS. In the % columns, the spreadsheet will show Gross Profit as a % of Total Sales. OPERATING EXPENSES (also called Overhead): These are necessary expenses, which, however, are not directly related to making or buying your products/services. Rent, utilities, telephone, interest, and the salaries (and payroll taxes) of office and management employees are examples. Change the names of the Expense categories to suit your type of business and your accounting system. You may need to combine some categories, however, to stay within the 20 line limit of the spreadsheet. Most operating expenses remain reasonably fixed regardless of changes in sales volume. Some, like sales commissions, may vary with sales. Some, like utilities, may vary with the time of year. Your projections should reflect these fluctuations. The only rule is that the projections should simulate your financial reality as nearly as possible. In the % columns, the spreadsheet will show Operating Expenses as a % of Total Sales. NET PROFIT: The spreadsheet will subtract Total Operating Expenses from Gross Profit to calculate Net Profit. In the % columns, it will show Net Profit as a % of Total Sales. 15 Feed the Future Partnering for Innovation Strategic Planning Workbook

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20 Join our online community, the AgTechXChange! agtech.partneringforinnovation.org Contact us: partneringforinnovation.org