| Over the years, I have met and worked with literally | | | | current valuation, we can develop a plan that will use |
| hundreds of business owners. At one time or | | | | the principals of value in the valuation to build the |
| another, many of them have written a business plan. | | | | value of the business. |
| But very few of them have a working business | | | | Once we have a conceptual strategic plan, we need |
| strategy. A business plan and a business strategy are | | | | to determine those tactics that are likely to achieve |
| two very different tools. A business plan normally is | | | | that plan. "Strategy" is most often defined as an |
| prepared for a financing partner, either a bank or an | | | | elaborate and systematic plan of action intended to |
| investor. The purpose of the plan is to let investors | | | | accomplish a specific goal or goals, while the "tactics" |
| know about the business and its potential for | | | | are the actionable steps that will carry out the |
| success in order to encourage them to invest in the | | | | strategy. Having a well thought-out strategy keeps |
| business. | | | | the company focused and on target while |
| A business strategy is quite different. Rather than a | | | | implementing and tracking a list of actionable tactics |
| document for investors, this is a plan for the owner | | | | ensures real results. |
| to follow. It begins with an evaluation of the business' | | | | Tactics are the specific tools you will use to carry |
| goals. Where does the business owner want the | | | | out your strategy. Your tactics will need to adjust to |
| business to be in 5, 10 or 20 years, both in terms of | | | | the conditions of the market. For example, your |
| fair market value and cash flow? What are the plans | | | | strategy may include multiple locations. Your initial |
| for exiting the business? Will it be sold to an outside | | | | tactic may be to acquire other businesses like yours |
| party or to key employees, or will it be turned over | | | | in strategic locations. But you may find that there are |
| to the owner's children? | | | | not qualified or motivated sellers in your targeted |
| Next, we have to do a thorough evaluation of the | | | | locations. You may have to change tactics and build |
| current state of the business. This includes a valuation | | | | your own office in your desired location. |
| of the business and an evaluation of the business' | | | | With tactics tentatively in place, it's time to begin |
| strengths and weaknesses. The more thorough the | | | | implementing your business strategy. This includes |
| evaluation, the better the potential outcome, but | | | | building your team, developing your reports, creating |
| even a cursory evaluation is helpful. | | | | your systems and procedures and putting in place |
| Most businesses have a tendency to identify | | | | internal controls. When building your team, be sure to |
| strengths and weaknesses solely from input from | | | | have clear agreements in place with each team |
| top management. The approach needs to be broader | | | | member regarding their roles and responsibilities |
| than this to get a true assessment. A broader | | | | towards you and your business. Clear communication |
| approach includes interviews with key personnel and | | | | is essential to implementing a successful business |
| surveys of all staff levels. A side benefit of the | | | | strategy. |
| interviews and surveys is it provides significant insight | | | | Be sure that the reporting is set up to give you the |
| into the opportunities of the business. | | | | information you need to make sure everything is |
| Also included in the evaluation should be | | | | implemented and running smoothly. Good reporting |
| benchmarking. Benchmarking identifies areas in which | | | | relieves much of the stress of running a business |
| a business is above or below the industry averages. | | | | because you know what is happening and why it is |
| This analysis can immediately identify areas of | | | | happening. |
| opportunity. | | | | Good reporting is also part of good internal controls. |
| Now we need to create a strategic plan to | | | | You must have internal controls in place, not only to |
| overcome the business' weaknesses and to use its | | | | prevent fraud and theft, but also to ensure that the |
| strengths to create the desired value and cash flow. | | | | work is being done in the way you expect. |
| The valuation is key to this process. Most businesses | | | | Creating workable and efficient systems and |
| never have a valuation done until they are ready to | | | | procedures allow you to run the business by |
| sell or gift the business. This makes no sense. If we | | | | managing systems rather than managing individuals. |
| want to target a specific value in the future, wouldn't | | | | With proper systems in place, you can build your |
| we want to know the current value and the method | | | | business as large as you want while maintaining |
| of valuation that is used in our market? By doing a | | | | efficiency and high levels of profitability. |