Why a Strategic Plan is Essential
As a small business owner, skipping the step of writing a strategic plan for your business is tempting. You may think you don't need one, or it's not worth the effort. Or you might be a rebel entrepreneur who doesn't like to do things like everyone else. But a strategic plan is essential for success. And especially for a small business.
A plan is a roadmap for your business. It helps you clarify your vision, set goals, and measure progress. A plan gives you focus and direction. And if things don't go according to plan (and they never do), you can course-correct more quickly and effectively.
So read on and learn everything you need to know about why writing a strategic plan is essential for your business.
The Benefits of Writing a Strategic Plan
A good plan will take some time and energy to create. You'll need to sit down and think, write, research, plan, and make decisions. If you're a planner like me, then that sounds like heaven. If you're not a planner like so many entrepreneurs I meet, this is the last thing you want to do with your time. You'd rather meet with clients, create new offers, or tweak your website.
But the ROI (return on investment) to writing a plan is often overlooked because we're taught to measure success but dollars alone. And while your business solely exists to make money, how you make money matters—deciding the why, when, who, what, and how of making money in your business is how you make more money. And this is what a strategic plan is all about.
The reason for writing a business plan isn't just to have one. It's about the work that goes into it and what you choose to do with the plan once it's created. The benefits you get from doing the work of writing the plan are as valuable as the plan itself. And the best part is the more you do it, the bigger the gains. Following are some of the most significant benefits of creating a strategic plan.
A strategic plan makes decision-making easier.
You're making daily decisions in your business, and each one sends your business in a specific direction. Many small business owners get decision fatigue and worry endlessly about making the right decisions. And, without a plan, your choices are based on your best guess, the opinions of others (who often have little to no business expertise), or the latest trends.
Decisions get more manageable when you have a plan for your business because it serves as a guide. You made some critical decisions when you created the plan, which means you now have a guide for making other decisions. When you hit a fork in the road, you can review the roadmap to help you decide which direction to take. And while this doesn't guarantee every decision will be the right one, it will increase your odds of success in making the right decisions.
A strategic plan establishes priorities and creates focus.
There's a never-ending pile of work and no lack of ideas to try. And this can cause you to feel overwhelmed. It can lead to procrastination or hasty decisions. How do you know what the right work is in any given situation?
A strategic plan clarifies your priorities by establishing specific goals and milestones for your business to achieve. Clear goals make it easier to decide what work takes precedence daily, weekly, or monthly.
A strategic plan reduces risk.
You knew risk was involved when you decided to start your own business. But sometimes, that risk feels overwhelming and can make you hesitate. You try to avoid the risk, which leads to a lack of growth in your business and keeps you from achieving your goals. And while a plan can't eliminate risk (nothing can), it can help you reduce risk in your business.
Creating your plan includes research and analysis to identify the best path forward. This will help you identify potential risks early so you can create a plan that either avoids them or mitigates their impact on your business. This work alone will set you apart from your competitors who are still winging it and getting bombarded with risks without a plan.
A strategic plan accelerates growth.
I see businesses of all sizes take the spaghetti-on-the-wall approach and hope one of their ideas will stick. Big companies sometimes get away with this because they have more resources (people, money) to afford a mistake here and there. So while this approach may not cause their business to fail, it's a slower path to growth. And for some, this lack of a plan eventually leads to their downfall.
As a small business owner, you have limited time and resources, so you can't afford to take this approach. You don't have room for many mistakes and guesswork because there's very little or no safety net to support you.
When you create a strategic plan, you design the best path for growth based on research, critical thinking, and expertise. You determine a strategy for growth that helps ensure you spend more time and effort on work that moves the needle.
Not every plan works out perfectly, and not every decision you make in your plan will work out. But when you establish a plan for growing your business, you don't waste time on guesswork and instead focus on proven growth strategies for your business.
A strategic plan builds confidence.
It's not easy being a business owner. Some days it feels like there's so much you still need to learn, which can lower our confidence and cause us to hesitate.
Creating a good plan doesn't come easy, but that's good. Just like any new skill, you have to work at it. But even a weak strategic plan is better than no plan at all because creating the plan helps build your business acumen. And as you get smarter about running your business, you get more confident about its long-term potential.
A strategic plan reduces firefighting and hustling.
Every business has problems, gaps, and obstacles. But many go unseen or unknown because you're so busy fighting fires and hustling to get that next client. Doing a gap analysis or assessment of your business feels like a luxury. But it's the only way to escape the endless cycle of firefighting and hustling.
Your plan provides a clear picture of what you intend to happen. You use the plan to identify gaps by comparing the plan to what's really happening. Then you use this to get to the root cause of the fires so you can do more fire prevention and less firefighting.
A strategic plan helps you pivot quickly.
If we've learned anything in the past few years, it's that we need to be ready for anything. Some would say there's no point in making a plan with all the changes that occur on a daily basis. How can you plan with so much unpredictability? But a common misconception is that a plan should have all the steps defined up front and that it's set in stone.
Your plan is a roadmap. There's more than one way to reach your destination. But when you created your plan, you chose a specific route. As you encounter obstacles and unexpected developments, you may need to take a detour here and there. Your plan helps you make these quick pivots easily while still staying the course to achieve your goals. Without a plan, that roadblock can send you heading back in the direction you came or leave you going in circles. And this ultimately sets your business back.
A strategic plan keeps the shiny squirrels at bay.
Your head is full of ideas. And everyone has an opinion. There's an entire industry built around the fact that you're searching for solutions, and they offer them up daily. It's tempting to chase after that shiny new idea (or shiny squirrel). It's not uncommon for business owners who have reached a level of success to want to start something new, especially when they lose motivation and interest in their business.
Many small business owners try to chase the shiny squirrels before their business is ready. Achieving some success isn't the same as achieving stability. But with a solid strategic plan, you can create the stability your business needs and plan for starting the next big idea. Having a plan will keep you grounded in what's needed and prevent you from getting distracted before you're ready to launch that new program or start that second business.
A strategic plan helps you build the business you want.
Your business has one job to do - make money. But you're trying to do more with your business. You want to make a difference and have more freedom. This means how your business makes money matters—deciding your company's why, when, who, what, and how is the path to making more money. And this is the purpose of a strategic plan.
Your business can quickly end up in a place you didn't intend. Business owners can have very profitable businesses and still be miserable because they didn't pay enough attention to HOW their business was making money. A good strategic plan can create a business that aligns with your wants while delivering the cash flow you need.
What the Data Says
Those benefits alone make strategic planning seem worth your time. Who doesn't want to have clear priorities, greater confidence, make decision-making more manageable, and have a faster path to profit?
Even with all those benefits, it's important to look at the data.
Here are some studies that show how planning relates to small business success:
- Businesses that completed a business plan were twice as likely to succeed in growing their business versus those with no business plan.
- A study of 135 small businesses showed that those that planned outperformed businesses that did not plan.
- Planning for small businesses has a stronger positive effect on the performance of established companies than it does on new ones.
- A study on small business failure in the U.S. found that very little formal planning is done.
- That same study found that successful businesses did more planning than similar businesses that failed.
Strategic planning is a critical component of success for any small business. By taking the time to develop a plan, you are building your confidence as an entrepreneur and putting yourself in a much better position to achieve rapid growth.