By Rick Norris
I have known of a number of hobbyists who have restored vintage automobiles. They tear down and rebuild their prized possessions. This reconstruction differs from guiding something on a predetermined course to a destination currently out of their reach. So is the distinction between a business plan and a strategic plan.
Yes, one might insert a little strategy into his or her business plan, but strategy would not be the focus of that document. A business plan is like the plan to restore the automobile. It is a management document which lays out the basic requirements to start and maintain a business through a period of time, (usually five years). Just like in restoring a vintage automobile, one must take inventory of all resources, parts, labor, etc., needed to build the business.
But where is the business going? Your business plan created your small or medium-sized business, but what now?
Many times the only goals new clients express are “What are my sales?” And, “Do I have enough cash to make payroll?” We assist our clients in operating their businesses efficiently. However, most of them focus only on the step in front of them, and not the horizon beyond. They fail to strategize and set out an action plan which implements a strategy.
The first tool you need is a strategy session. The session may vary in length depending on the strategist. Starting with the accounting records, we may uncover issues that help us gaze into the future ten to twenty years. Accounting records can produce accounting metrics that point to much larger problems not visible on a balance sheet.
There are risks, though. First, the company accounting records must be correct. A step that we CPA’s and bookkeepers must perform which may result in higher costs and effort. Second, a business owner must take the strategic planning process seriously. This is done by the owner to thinking strategically, not tactically. And lastly, once the plan is completed, it must be implemented and monitored every year.
We have seen that most small and medium-sized businesses drive their companies down the road without any idea as to which street to take. Their only measure of success is usually to stay on (or in) the black and not run the “car” into a ditch.
Rick Norris, JD, CPA is the owner of Rick E Norris, Accountancy Corporation and has published articles in the California CPA Society magazine, among other periodicals. He sits on the California CPA Society Entertainment Industry Conference Planning Committee and is a board member of the L A Chapter of the Association for Strategic Planning.