Memo: Guide To High-Level Strategic Planning for Small & Medium Businesses.
Covering On:
PART I: Where Business Leaders Get Strategic Planning Wrong.
PART II: 7 Steps To Complete Strategic Planning.
PART III: The Strategic Planning Example & Template.
PART I:
Where Business Leaders Get Strategic Planning Wrong.
CEOs or Founders would come to me with either of these 2 problems; one is where they have a revenue growth target for the year but don’t know exactly how to achieve it and another is where they have even the monthly and weekly forecasted financial targets but they are not hitting their monthly and weekly numbers.
Usually it would look like this:
Founder with Problem 1:
“We are targeting at 40% in Revenue Growth to achieve RM15 million this year, but we don’t really have a clear plan to get there yet.”
Founder with Problem 2:
“We are targeting at 40% in Revenue Growth to achieve RM15 million this year with 35% Pretax Profit Margin
so our monthly performance should be of revenue at xx, cogs at xx, gross at xx, and overhead at xx, ensuring 35% monthly profit margin. And we divide the financial goals by 4 or 5 depending on the week for our weekly targets.
But we’re not achieving those monthly and weekly financial goals.”
The fact is, most CEOs are on the right track. It’s just that their strategic planning process is incomplete.
Yes, Most businesses would approach strategic planning in an incomplete manner. They would breakdown their annual financial targets into weeks and months, putting them as their initiatives to achieve their growth objectives. It would be obvious to them that Problem 2 would be the solution for Problem 1 because they would think:
—
“We just have to achieve the weeks and months financial targets and we can achieve our annual targets!”
—
only for them to wonder weeks or months later…
Question 1:
“Wait…how exactly do we achieve the weekly and monthly financial targets? How do we make sure we are selling more?”
Question 2:
“Wait…if we want to sell more, who’s going to be the one that buys more? Why should they buy more in the first place?”
—
Business leaders are unable to achieve their forecasts and struggle with these 2 questions because they don’t start strategic planning by clearly defining their Growth Objectives and Market Territories to establish the right initiatives that would increase customers, purchases, and organisational profitability.
7 Steps To Complete Strategic Planning:
1. Clarify 202X Growth Objectives
2. Define Market Territories
3. ???
4. ???
5. ???
6. ???
7. Achieve 202X Year-End Revenue Growth & Profit Targetp/s: complete breakdowns are available in PART II
STEP 1: Clarify 202X Growth Objectives
1.1- Market Expansion Plan
What Products will the business develop and launch this year?
What Customer Segments will the business penetrate into this year?
What Geographies will the business penetrate into this year?
1.2- Customer Growth Target
How many New Customers will the business Acquire this year?
→ who are the new customers?
→ how will the business get them to buy for the first time?
How many Returning Customers will the business Retain this year?
→ who are the returning customers?
→ how will the business get them to buy again?
How many Ascending Customers will the business Ascend this year?
→ who are the ascending customers?
→ how will the business get them to buy/spend more?
1.3- Year Revenue Growth & Profit Target
How much in Revenue will those customers contribute to the business this year?
→ how much in new sales per product line?
→ how much in returning sales per product line?
→ how much in ascending sales per product line?
How much in Revenue Growth will the business achieve this year?
→ how much in Annual Revenue? how much in growth %?
→ how much in Revenue Contributions per product line?
→ how much in Revenue Contributions per sales channel?
How much in Gross Profit % will those Revenue contribute this year?
→ how much in cogs per product line?
→ how much in gross profit per product line?
How much in Overheads to ensure n% Profit Margin?
→ how much % are marketing expenses over revenue?
→ how much % are facilities and admin expenses over revenue?
→ how much % are salary expenses over revenue?
1.4- Weeks & Months Customer & Revenue Contributions Targets
What are the Weeks and Months Customer & Revenue Contributions to the annual numbers?
→ new customers & new sales per week/month
→ returning customers & returning sales per week/month
→ ascending customers & ascending sales per week/month
→ sales contribution of product lines per week/month
→ gross profit contribution of product lines per week/month
→ overheads benchmarks per week/month
→ operating profit per week/month
1.5- Team Cadence
How are Productive Meetings established within the Organisation?
→ daily meetings (Administrative Issues)
→ weekly & monthly Meetings (Business Reviews)
→ strategic meetings (Quarterly Business Review)
→ yearly meeting (Business Review & Strategic Planning of Coming Year)
STEP 2: Define Market Territories
2.1- Define Core Differentiated Offerings
→ core value differentiates their products and services from other market alternatives.
2.2- Define Core Customer Segment
→ core customers that would highly value those differentiations are.
2.3- Define Core Selling Strategy
→ pipelines to communicate and deliver those differentiations in ways that would highly satisfy the core customers and encourage more purchases.
2.4- Define Core Category Specialisation
→ core activities must be done by the organisation to establish long-term strong credibility and dominance to OWN those differentiations.
Products don’t simply just sell, customers buy it.
Your initiatives to capture sales should be about capturing customers to buy for the first time, to buy again, and to buy/spend more. But to put initiatives to capture customers, you first have to decide how much customers will you be acquiring and why they should be buying from you.
Based on those narratives, you work on;
(1) coordinating operational quality,
(2) efficiently communicating the business value propositions, and
(3) delivering them in ways that would…
… increase customer satisfactions, increase customer base, increase customer purchases, and increase organisational profitability.
Without clear Growth Objectives and Market Territories however, businesses are unable to efficiently convert awareness into sales and convert sales into more sales because they don’t know…
How to achieve the weekly & monthly sales numbers
What customers will contribute to those weekly & monthly sales numbers
How those customers will contribute to weekly & monthly sales numbers
How the organisation will acquire those customers
7 Steps To Complete Strategic Planning:
1. Clarify 202X Growth Objectives
2. Define Market Territories
3. ???
4. ???
5. ???
6. ???
7. Achieve 202X Year-End Revenue Growth & Profit Target
p/s: complete breakdowns are available in PART II
If the first 2 steps of strategic planning is incomplete, the business won’t make it to the 7th.
With incomplete strategic planning, businesses are unable to efficiently capture customers and sales. And since these businesses are unable to sell well, they will be stuck with unsold inventories, face gradual burn of cash reserves to support monthly overheads, and are unable to invest in new talents, new product ideas, or improvements in operational quality.
They won’t be able to achieve their Year-End Revenue Target & Profitability Target for the year!
the importance of Market Territories,
Let me ask you a fresh and simple question:
The Premise:
If executives are;
1. unclear of WHAT core value differentiates their products and services from other alternatives,
2. unclear of WHO the core customers that would highly value those differentiations are,
3. unclear of HOW to communicate and deliver those differentiations in ways that would highly satisfy the core customers and encourage more purchases,
4. unclear of the core activities must be done by the organisation to establish long-term strong credibility and dominance to OWN those differentiations or value propositions…
The Question:
… do you think they can clearly efficiently coordinate the business to; communicate the right value props to the right people, deliver those value props in ways that highly satisfy customers, and further encourage customers to buy more — to buy more of what, to buy more of when, to buy how much more?
In short, the Question is:
Can the executives do their jobs to help grow the business without understanding the business Market Territories?
Can they plan a good execution plan for the business?
Of course it’s obvious, NO.
That’s why clearly defining Growth Objectives and Market Territories is extremely important. Only then the business can efficiently coordinate its operational functions to fit those important narratives. The difference with great companies is quite simple, they clarify priorities for their executives to focus and to be aligned on — aligning the Growth Objectives with Market Territories — and the executives help the business grow based on them.
Most companies are run by a group of well intentioned executives who have a good understanding of the details of their business so they might get the job of setting Growth Objectives done really well.
However, many executives hardly spend much time thinking or talking about why their organisation exists or what values should drive business and customer behaviours. Though they talked about being strategic, they can’t really come into the same page on their core differentiated offerings, core customers segments, core selling strategy, and core activities to dominate market categories.
“We need more marketing….more sales will come!”
To make squeeze in more sales, struggling businesses might be tempted to dispense cash for aggressive marketing efforts or offer discounts in return for cash flow. Some might even do both. They sure might achieve their operational metrics, but not their financial metrics — especially gross profit per product/service. Not to mention the inefficiencies of cash dispensed or margins sacrificed compared to cash gained for the business.
Great businesses don’t play this zero-sum game. They understand their customers to communicate the right values, justify their prices, and be the best in delivering those values. Great businesses have what we call Pricing Power — the ability to charge high prices and capture high gross profit margin without losing demand. Thus, they have more cash than their peers, allowing them to reward their talents, hire new ones, and expand the business towards similar customers segments, geographies, verticals, or industries.
—
Conclusion
With incomplete strategic planing, businesses are unable to efficiently convert awareness into sales and convert sales into more sales because they don’t know…
How to achieve the weekly & monthly sales numbers
What customers will contribute to those weekly & monthly sales numbers
How those customers will contribute to weekly & monthly sales numbers
How the organisation will acquire those customers
Thus, they can’t:
(1) coordinate operational quality,
(2) efficiently communicate the business value propositions, and
(3) deliver them in ways that would…
… increase customer satisfactions, increase customer base, increase customer purchases, and increase organisational profitability.
7 Steps To Complete Strategic Planning:
1. Clarify 202X Growth Objectives
2. Define Market Territories
3. ???
4. ???
5. ???
6. ???
7. Achieve 202X Year-End Revenue Growth & Profit Target
If the first 2 steps of strategic planning is incomplete, the business won’t make it to the 7th.
Thus, having a complete strategic planning is EXTREMELY IMPORTANT for any business because it means having an organisation that could clearly define where the business is going for the year, truly understand its customers, discuss insightful discussions to establish the right initiatives to the right functions and people, and execute them right — it means having a team that could really help the business achieve its forecasts and growth objectives for the year.
That is a Competitive Advantage that businesses should prioritise and cultivate first. The Advantage of an aligned organisation that is better at producing performance and achieving forecasts.
But it starts with the Managing Director/Founder/CEO efforts to lead the organisation in establishing the 7 Steps To Complete Strategic Planning with their executive team:
Do Your Benchmarking (Strategic Planning)
1 Day Workshop With Us:
PART II:
7 Steps To Complete Strategic Planning.
7 Steps To Complete Strategic Planning:
1. Clarify 202X Growth Objectives
2. Define Market Territories
3. Coordination For Operational Quality Improvements
4. Achieve Weeks & Months Team KPI
5. Achieve Weeks & Months Customer KPI
6. Achieve Weeks & Months Sales KPI
7. Achieve 202X Year-End Revenue Growth & Profit Target
STEP 1: Clarify 202X Growth Objectives
1.1- Market Expansion Plan
What Products will the business develop and launch this year?
What Customer Segments will the business penetrate into this year?
What Geographies will the business penetrate into this year?
1.2- Customer Growth Target
How many New Customers will the business Acquire this year?
→ who are the new customers?
→ how will the business get them to buy for the first time?
How many Returning Customers will the business Retain this year?
→ who are the returning customers?
→ how will the business get them to buy again?
How many Ascending Customers will the business Ascend this year?
→ who are the ascending customers?
→ how will the business get them to buy/spend more?
1.3- Year Revenue Growth & Profit Target
How much in Revenue will those customers contribute to the business this year?
→ how much in new sales per product line?
→ how much in returning sales per product line?
→ how much in ascending sales per product line?
How much in Revenue Growth will the business achieve this year?
→ how much in Annual Revenue? how much in growth %?
→ how much in Revenue Contributions per product line?
→ how much in Revenue Contributions per sales channel?
How much in Gross Profit % will those Revenue contribute this year?
→ how much in cogs per product line?
→ how much in gross profit per product line?
How much in Overheads to ensure n% Profit Margin?
→ how much % are marketing expenses over revenue?
→ how much % are facilities and admin expenses over revenue?
→ how much % are salary expenses over revenue?
1.4- Weeks & Months Customer & Revenue Contributions Targets
What are the Weeks and Months Customer & Revenue Contributions to the annual numbers?
→ new customers & new sales per week/month
→ returning customers & returning sales per week/month
→ ascending customers & ascending sales per week/month
→ sales contribution of product lines per week/month
→ gross profit contribution of product lines per week/month
→ overheads benchmarks per week/month
→ operating profit per week/month
1.5- Team Cadence
How are Productive Meetings established within the Organisation?
→ daily meetings (Administrative Issues)
→ weekly & monthly Meetings (Business Reviews)
→ strategic meetings (Quarterly Business Review)
→ yearly meeting (Business Review & Strategic Planning of Coming Year)
STEP 2: Define Market Territories
2.1- Define Core Differentiated Offerings
→ core value differentiates their products and services from other market alternatives.
2.2- Define Core Customer Segment
→ core customers that would highly value those differentiations are.
2.3- Define Core Selling Strategy
→ pipelines to communicate and deliver those differentiations in ways that would highly satisfy the core customers and encourage more purchases.
2.4- Define Core Category Specialisation
→ core activities must be done by the organisation to establish long-term strong credibility and dominance to OWN those differentiations.
—
With clear Growth Objectives and Market Territories, the business is able to establish the right Operational Quality Improvements with the right Team KPI to efficiently (1) communicate value props and (2) deliver value props to customers in ways that would increase customer satisfactions, increase customer base, increase customer purchases, and increase organisational profitability.
—
STEP 3: Coordination For Operational Quality Improvements
3.1- Operational KPI
3.1.a- Production Cycle Time Decrement To XX
3.1.b- Customer Acquisition Cost Decrement To XX
3.1.c- Sales Cycle Time Decrement To XX
3.1.d- Payment & Billing Cycle Decrement To XX
3.1.e- Inventory Turns Increment To XX
3.1.f- Order Fulfilment Cycle Time Decrement To XX
3.1.g- Customer Satisfaction Score Increment To XX
3.1.h- Referrals Rate Increment To XX
3.2- Operational Quality Coordinations
[Standardisation → Optimisations → Operational Visibility]
What are each Teams priorities?
→ What Structures to be optimised?
→ What Talents need to be in placed?
→What Processes need to be optimised?
→ What Core Processes need to be monitored?
→ What Executional KPI need to be monitored?
3.2.a- Inventory (Operations)
Quality, Defects Rate, Purchase Cost, Purchase Volume, Delivery Schedule, Delivery Distance, Storing Space, Availability.
3.2.b- Production (Operations)
Processing Cost, Processing Volume, Processing Schedule, Processing Bottleneck, Processing Completion (Proximity).
3.2.c- Overheads & Payables Billing (Finance)
Billing Cost, Billing Schedule.
3.2.d- Value Props Communication (Marketing/Sales)
Materialisation
Broadcasting
Social Proof
3.2.e- Order Payment (Sales/Finance)
Payment Cost, Payment Volume, Payment Schedule.
3.2.f- Order Fulfilment (Operations)
Fulfilment Cost, Fulfilment Volume, Fulfilment Schedule, Fulfilment Distance Complexity.
3.2.g- Customer Service SOP (Customer Service)
Pre-Sale.
During-Sale.
Post-Sale.
x
|
|
x
STEP 4: Achieve Weeks & Months Team KPI
4.1- Team Revenue KPI
Team execute XX to acquire XX new customers per channel,
Team execute XX to acquire XX returning customers per channel,
Team execute XX to acquire XX ascending customers per channel.
4.2- Team Operational KPI
Production Days below XX Days
Customer Acquisition Cost below XX
Sales Days below XX Days
Payment Days below XX Days
Billing (Payable Days) above XX Days
Inventory Turns above XX
Order Fulfilment Days below XX Completion Rate below XX
Customer Satisfaction Score above XX
Referrals Rate above XX
x
|
|
x
STEP 5: Achieve Weeks & Months Customers KPI
XX amount of new customers sales per product line.
XX amount of returning customers sales per product line.
XX amount of ascending customers sales per product line.
x
|
|
x
STEP 6: Achieve Weeks & Months Sales KPI
XX amount of sales per product line.
XX amount of gross profit per product line.
x
|
|
x
STEP 7: Achieve 202X Year-End Revenue Growth & Profit Target
Year-End 202X Revenue of RM??? (+n% Growth)
Year-End 202X Operating Profit of RM??? (+n% Growth)
PART III:
The Strategic Planning Example & Template
Do Your Benchmarking (Strategic Planning)
1 Day Workshop With Us:
Private 1 Day Benchmark Workshop for SME Owners and Executives to review business health and strategically plan the building blocks required to achieve their year objectives of customer growth, revenue growth, profit growth, and cash growth.