Planning effective strategies for privately owned businesses

Why some companies do not succeed

Many of us own the companies we are Directors of. Sometimes we inherit the business but often we have launched and developed our companies from an early stage and have built our businesses around our individual skill sets, experience, preferences and personalities. That’s fine in the early stages but it often means that vital parts of the business are run by people who are not specialists in that area, restricting the organisation’s ability to succeed. Many companies lack a full set of Board and Management level business skills. They are unable to adequately identify the risks and opportunities facing them and to create and implement plans to operate and develop their companies and create wealth for their owners.

The attributes of successful businesses

If we want to build real value in our businesses we need to think, plan and act differently, taking time to step back from the day-to-day running of the business. Successful companies have longer time horizons, anticipate change and continually form, assess and implement plans for the growth and positioning of their businesses. They create effective systems and develop effective staff. They ensure they have access to a range of specialist skills, either internally or externally, from marketing through operations to finance. And they do this in a cost effective way.

The most successful businesses in the UK have some, if not all, of these characteristics:

  • A clear strategy and vision
  • Know their market position or niche
  • Have an effective sales machine
  • Organise their business around systems, not people
  • Understand how to recruit, retain and motivate management and staff
  • Plan their finances
  • ‘Manage’ rather than ‘do’
  • Have an effective Board structure
  • Know when and how to exit their business
  • Seek advice

The Business owner’s dilemma

Ten years ago I invested in a fledgling UK publishing company providing business to business products and services around the English speaking world, mainly in the USA. At the end of the start up period it was clear that the company lacked direction, was losing money and was likely to continue to do so.

I acquired the publishing company and invested both time and money building it up. Although I had been a Director of a number of relatively large companies I knew that I lacked a full range of relevant skills. My ability to plan and implement the development of the business was hampered in particular by my lack of both industry knowledge and Marketing and Sales skills. In common with many businesses of this size I was unable to lure skilled personnel from large companies and I felt that although the consultancy firms might provide some interesting ideas, they would not be a viable source of assistance in the long term. Although the company developed well and I achieved a successful trade sale I now realise that I could have done significantly better with external help.

Many readers will identify with the loneliness business owners feel and the difficulty they have in planning and implementing the development of their businesses and in sourcing valuable, practical and impartial assistance. The remainder of this chapter covers the contents of strategic plan, the implementation process, the types of assistance you can access at each stage and what you should look for in an advisor.

The Strategic Plan

A strategic plan is a set of objectives and an action plan to achieve those objectives. Most business owners will tell you they have one, but often it is not formally drawn up or, more importantly, adhered to. To achieve an effective plan you need to have a clear understanding of the following:

  • The goals and objectives of the owners and Directors, including financial, retirement and work/life expectations
  • The market for your products or services, where do you fit into it, how will it change, what are the risks and opportunities?
  • Your customers, why and for how long will they need your products and services, what else do they need?
  • Your competitors, their strengths and weaknesses
  • The quality of your people, their ability to develop with the company, your ability to develop them and your ability to attract appropriate new staff
  • Your suppliers, are they secure?
  • The funding requirements of the business and how they can be best achieved.
  • Financial forecasts and the impact of all key variables on the results
  • How you will successfully implement the plan

With this knowledge you can assess the risks and opportunities facing your business, set some informed objectives and create a plan to achieve them. You need to be certain that all relevant parties understand and accept both the objectives and the plan.

If the owners are planning to sell the business in the next few years the planning process should also include an assessment of:

  • The available exit route or routes; flotation, trade sale, MBO etc.
  • The profile of potential buyers
  • The likely range of valuations to be expected

And:

  • An exit timetable
  • An action plan to achieve successful sale at an optimum value whilst continuing to effectively operate the company and whilst maintaining staff morale. 

For many companies strategic planning is a daunting, albeit rewarding, task. There are a number of organisations providing cost effective and efficient assistance to business owners in creating their strategic plans or critically evaluating them once they have been drawn up. The advantage of using one of these organisations should be:

  • A more structured planning process and resultant plan
  • A shorter delivery time
  • A critical assessment of your business model
  • Input from a wider knowledge base
  • Greater objectivity
  • The ability to benchmark your plan against businesses in similar markets
  • A reduction in “group think”

Implementation

There is no point in planning unless all the principal parties understand, accept and implement the plan. Often business owners start of with good intentions but then become bogged down in the detail of the day to day working week and the strategic plan becomes valueless. To maintain the direction of the company the principal parties need to meet regularly to:

  • Critically review the business
  • Assess progress against pre-determined benchmarks
  • Actively identify risks and opportunities
  • Constantly re-evaluate the strategic plan
  • Clearly define actions and responsibilities

Businesses often fail to undertake this process successfully. There are a number of organisations that will, for a small proportion of the cost of a full time Director, assist business owners with the plan implementation process providing them with:

  • The discipline of a regular, objective forward-looking review
  • The active long-term support and encouragement of an experienced business professional
  • A trusted and impartial advisor with a detailed understanding of the business
  • Increased contacts and knowledge

Ring any bells? Contact Mike Robson on 0207 100 1233 or mike.robson@azurepartners.co.uk