The lack of strategic planning in the smaller sized companies can often be attributed to a lack of time and understanding. Owners and company executives tend to become absorbed with the daily operations of the company; focusing on the immediate and not the long-term. Contrarily, some company owners may recognize the importance of strategic planning yet are hindered by a lack of understanding of the processes. Although vast volumes of books have been written on the subject of strategic planning, many address the needs of a large corporate entity and speak of complexities that are not applicable to the smaller organization.

Strategic planning does not necessarily need to be a complicated process involving elaborate planning tools. In its simplest structure it can be described as the development of a long-term company positioning based on that which provides value to customers and shareholders. It requires knowledge of the fundamental industry shifts and how customers and competitors are responding to those changes. Flexibility is an inherent characteristic, required for continuous change and adaptation. Evaluating strategic options is based on identifying those choices that are most capable of providing value for all stakeholders and aligns with the organizations’ vision and core competencies.

Therefore, the best place to start is to develop an awareness of the fundamental changes occurring within the industry and begin to align those changes with the organizations’ core competencies. To this end, answering the following three questions can provide any sized organization with a starting point.

(1) What Business are we in?
(2) What changes are occurring in the industry?
(3) How do we make money?

To purchase: Planning Your Company's Growth: A 10 Step Guide to the Strategic Planning Process http://businesssimplyput.com/SimplyPutSummaries.htm

The finance department is responsible for recording all the internal business accounting and bookkeeping transactions in the company’s accounting journals. This includes a myriad of activities such as sending invoices to customers and collecting payment, paying vendors and overhead expenses and distributing payroll.

While these are important and fundamental company functions, higher-level "CFO" responsibilities such as the management of the financial resources, profitability assessment, budgeting and forecasting are crucial to maintaining the financial health of the company. Unfortunately, for budgetary reasons most small organizations do not hire individuals with this level of financial acumen. It is this lack of financial management that ultimately leads to company failure. In other words, it could be said that the company failed due to a decrease in sales but actually, the failure is due to the company inability to recognize the pending decrease and make the required financial adjustments.

Larger organizations also experience sales declines but the CFO recognizes this through forecasting models. They may still experience a decline as they are forced to do a massive layoff or debt restructuring but they continue to stay in business allowing time to recover. Whereas the smaller company, lacking the financial sophistication, looses the advantage of time to make the required changes.

Such financial acumen can be available to small companies and may not be as expensive as perceived. There are various companies and independent consultants that function as contract CFO's and business forecasting models can be purchased. Additionally, some CPA's also function as business consultants and offer CFO type services.

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 (See www.LWandAssociates.com and  www.BusinessSimplyPut.com for more information).

Bottom line-your business is not going to improve until either your customers’ business improves or you develop new customers. Now is the time to consider slight modifications to your business model. Can you change your product/service offering to attract a new or different buyer? Can you rebundle or repackage your offerings to sell at a different price point? Some of the best ideas (and companies) have developed out of a need to change the status quo in response to new market conditions.

Moreover, the best ideas originate as solutions to existing problems. Invest time listening to your customers and learn about the challenges they are facing. You will gain inside information about industry trends and may just learn about a problem that your company has the core competencies to solve, which can become a new future revenue stream.

Don’t be preoccupied by economic indicators that predict the end of the recession, as your industry could be well on its way to recovery before such indicators turn positive. Instead look for positive signs developing in your backyard, such as your customer’s businesses are beginning to improve, increased sales inquiries, and a general renewed optimism in your industry.

Watch for complimentary and substitute changes in consumer behavior. If suddenly Wal-Mart’s parking lot is less full and Target’s has increased, perhaps consumers are once again looking for up market prices and offerings. Some behaviors established during the economic crises may become future habits. Do not become blind sighted believing that what was once—will be again.

In order to succeed in today’s Darwinian environment, business leaders need a combination of acumen, intelligence and instinct. Personal relationships with employees, customers and vendors are the company’s core assets, which will be invaluable as companies seek to reestablish growth. While it is true that we have had unprecedented high living, to the likes that we may never see again in our lifetime, that does not mean that tomorrow will not present new opportunities with the renewed excitement and optimism that has been the foundation of the American entrepreneur.

Lori Williams has released two new e-books available in PDF format and on Amazon for Kindle. Visit www.BusinessSimplyPut.com and click in ebooks to learn more.

In order to survive long-term, companies must develop a unique and sustainable competitive advantage—what will set your company apart from your competitors. Additionally, independent of size or time in business, companies have limited resources for deployment and must determine how best to invest scarce resources. The main resources are human capital (the people and their talents) and financial capital (the amount of money available to invest in operations, marketing etc.)

Conversely, the organization may have a plethora of opportunities, ideas and goals that it desires to pursue. This presents a strategic dilemma. The organization needs to invest its limited resources in those opportunities that have the greatest potential return, while maintaining a long-term sustainable competitive advantage. In this, the strategic plan’s objective is to provide business leaders with a framework of choices –what industries to pursue, what products or services to offer and how to deploy scare resources for the maximum return.

Moreover, the strategy must be dynamic. There was a time when strategic plans could last a decade (or more) but this is no longer true. A strategic plan may have a shorter shelf life than one would expect. Companies in mature industries may be able to develop a strategic plan which could last several years and be reviewed yearly with slight modifications. However, companies in emerging industries or those experiencing seismic structural shifts may need to revisit their plan quarterly. In fact, it could be argued that the best strategic plan in today’s fast-paced business environment is not written very far in advance but developed in real-time as the game evolves; new competitor’s spring into action, demand or preferences change and technology brings a new twist. A strategy driven organization accepts the fact that the strategic plan must evolve as the economy, business environment and other factors present new threats and opportunities. In contrast, the organization that does not engage in strategic thinking tends to maintain a reactionary stance, trying to defend its position rather than seeking new opportunities.

The ebook Strategic Planning Made Simple--10 Easy Steps can be purchased at www.BusinessSimplyPut.com

The intangibility of services has implications for the choice of branding. Since service decisions are often made without an actual prior experience of the service, previous communication efforts must allow the potential client to understand its value tacitly.

 A distinctive brand strategy must build reputation and recognition, provide information and education and promote differentiation. Depending on the desired future growth of the firm, branding can either be developed over time through satisfied clients (word of mouth) or communicated extensively through a PR/marketing campaign. Service firms must therefore design marketing communication and informational programs so that clients learn more about the brand, rather than having limited exposure through purchase or referral.
 
Devising Brand Strategy

Services must develop a brand hierarchy and brand portfolio that permits positioning and targeting of different market segments. Classes of services can be branded vertically based on price and components. This can be achieved through differentiating by price or bundling.

Moreover, the method of introduction (how services are packaged/bundled) can determine if a potential client will “risk” trying a service without previous history with the service and/or the company. For this reason pricing strategies should be adjusted to market demands and perceptions, while addressing profitability requirements.

Lori Williams has released two new e-books available in PDF format and on Amazon for Kindle. Visit www.BusinessSimplyPut.com and click in ebooks to learn more.

This week I attended the  Mid-Year Economic Forecast . The talk outside the conference was restrained optimism; a “maybe not bad as before” attitude. Here are some of the highlights from the presentation.

Unemployment remains uncomfortable high. More concerning, 40% of the people who lost their jobs have been unemployed for 6 months or longer. The economist stated that the recession is over, but growth will be slow and it will take many years before the economy can absorb those lost jobs.

Continuing to weigh down the economy is housing with high mortgage delinquency rates, banking with 40% of the bad debt yet to be realized on the balance sheet, the labor market as mention above and thereby a lack of consumer spending.
On a positive note, supporting the economy is an increase in exports and the fact that inventories are at an all time low, suggesting companies will need to begin producing. Aggressive monetary and fiscal policy continues to support growth but the big question is how long this can continue before inflation worries come into play.

To bring the economy back into balance credit must be allocated more conservatively. Consumption as a percentage of GDP is 70%. As credit continues to tighten, consumers will be forced to change their spending habits. In the New Economy consumers will be more likely to save and purchases will rely more on cash or debit cards.

An interesting trend is the changing structure of the labor force. Currently the average work week approximately 34 hours, therefore companies have room to increase hours rather than hire additional personnel. When in need of additional staff, and fearful of committing to new hiring, companies are moving towards contract labor rather than employment. This trend is expected to increase, whereby workers will be selling their services to several companies rather than becoming an employee at one.

I personally left feeling hopeful. I acknowledge that we are never going back to the good old ways of yesterday but then again, I have long held the question of whether they were really that good anyway.

I am fascinated by the concept of the “New Labor Force” and strongly believe it will bring new opportunities for both employees and companies by providing a labor/job/time flexibility that can benefit both.

Strategic plans built on faulty beliefs are sure to fail. Change can occur quickly and the average lifespan of a business model may only be a few years before modifications or a complete restructuring is required. With that said, change does not occur unnoticed overnight -- subtle clues (that are easily recognizable in hindsight) can be observed, allowing the organization the much-needed time to adapt.

It takes passion and commitment to grow a company and entrepreneurs must believe in their dream in order to overcome skepticism. Unfortunately, sometimes the same drive and ambition that built the company can cause its destruction. Over time business leaders develop a skewed perception of the company’s capabilities and position in the marketplace. Often this is due to the business leader’s internal fear—they will hold tightly to what worked in the past afraid to change, even if all evidence suggest the need for a new approach.

Successful strategic planning requires rigorous thinking and honest assessment. To avoid false perceptions, historical financial data and past performance is included in the process. People can lie to themselves, but numbers will always tell the truth.

Excerpt from the book, Planning Your Company's Growth A 10 Step Guide to the Strategic Planning Process , which can be purchased as PDF format on www.BusinessSimplyPut.com or on Amazon for the Kindle at http://www.amazon.com/dp/B005EJN03G

Operations affect every aspect of a company. If the product/service does not meet quality expectations, is not delivered in a timely manner and/or within the cost allocation, both revenues and profitability will suffer.

Efficiency is the outcome of numerous documented procedures, integrated seamlessly and completed without error or waste. Many company failures are caused by inadequate processes and communication breakdowns. Most small companies do not invest adequate time and resources into system development, and their growth is hindered accordingly.

Processes develop over time as the company grows and are often the result of errors and problems that occur along the way. A deadline is missed due to a communication breakdown and as a result, a paper flow process is created. Things go well for some time and then another issue is discovered and a process is created to solve that specific issue; eventually a system is developed.

However, this method has inherent flaws (1) the system is comprised of a series of individual solutions to specific problems and may not be fully cohesive (2) the company lost time, money and possibly even staff during the error/solution process.

Given the disadvantages of developing processes in a haphazard fashion, the more effective method is to develop the entire system right from the start. By investing in the infrastructure early on, the company will have everything in place to grow to the next level.

To purchase EBooks on this and other business subjects visit www.BusinessSimplyPut.com

After two decades of consulting, I can identify common problems found in most companies. As expected, procedural inefficiencies, lack of internal quality or financial control and a host of others that most would suspect. However, one theme in particular I find fascinating. It has a profound negative effect and is rarely discussed—the strong desire to avoid conflict, sometimes at all cost.

The other day I had a discussion with a young business owner who was considering increasing inventory beyond financial wisdom just to avoid a discussion with the workers regarding a lack of quality. Last week I met with a client’s employee to discuss performance issues. It quickly became evident that the lack of honest communication regarding expectations was the crux of the problem. I have seem companies accept inferior efforts by vendors rather than confronting them and salespeople quickly lowering their price before even attempting to explain the value-add gained by the cost.

More often than not, it is within the small companies that these behaviors exist as the large companies are much better at holding their ground. Large companies have learned how to overcome the fear of conflict by passing responsibility onto a third party, “it is our policies” whereas small companies make each discussion and word “personal”.
Conflict can either be beneficial, spurring innovation and creativity or destructive, causing discord and acrimony. When used in its positive form, conflict can provide a catalyst for change. A popular term that illustrates the positive use conflict is “the devil’s advocate”. Such applications suggest a conflicting view is being presented in an attempt to provide a much-desired opposition. This process involves uncovering truths that if left undiscovered may have allowed an unsuccessful idea to be taken to fruition.

When conflict arises in a relationship the process of resolution can lead to an increased understanding and renewed commitment. In fact, it is not unusual to have relationship bonds strengthened by this sometimes-intense interaction. This can be experienced on both the individual and organizational level.

To those who are more open emotionally, conflict provides an opportunity for self-analysis and introspection. The well-known saying, “if you’re not part of the solution you may be part of the problem,” has great application.

Bank financing has long been the coveted funding source offering lower interest rates and eliminating the need to forfeit equity. With banks balance sheets leveraged with questionable subprime loans the bar has been raised and many small companies that could have received bank financing a year ago --cannot today.

In conversation with a banker from a local regional bank (one that was fortunate to have avoided the mortgage debacle) we discussed the increase of loan volume from companies who have been asked out of their current bank. Many of the loans are good low risk loans, my banking associates said, but their current bank needed to reduce their leverage. 

Several asset based financiers and other alternative lenders I spoke with said they also are experiencing an increase in loan volume and are able to charge higher interest rates for low risk loans. As associate who is involved in leasing said last year he was asked to compete with banks on interest rates, whereas today he is simply thanked for doing the deal.

This was further expressed during a meeting with a hedge fund manager who provides debt and equity financing to companies. He said he was getting equity type returns on what was actually a low risk loan.

The small companies that are still able to receive funding are paying more for their capital.  With that said, small companies are less likely to pass the charges onto their customers, resulting in margin erosion.