THE NEED FOR A STRATEGIC PLAN

Planning plays an important role in any business venture. It can make the difference between the success or failure of your business. You should plan carefully before investing your time and, especially, your money in any business venture. The following scenario -- “A Tale of Two Businesses”, best illustrates the need for a plan.

Individuals who had worked in management in much larger companies started two franchises (A and B). While Franchise A provided a product and Franchise B a service, the output of both franchise systems had been sold exclusively in the United States before the current owners became involved. The output of both was readily available in other developed countries as well. The franchises opened about the same time and neither franchisee had a strong market presence, nor do they at present. Today Franchise B is bankrupt. By contrast, Franchise A is selling products in the Midwestern United States and in Europe.

What was the deciding difference in the two franchises' success?You probably expect it to be that one had developed a strategic plan and the other hadn't; however, it isn't this simple. Many factors can influence the outcome of a business venture. There were many similarities between the franchises, but there also were many differences. Most notably, Franchise A sold a product and Franchise B a service (although this does not clearly limit options). Another difference was that Franchise A had a carefully thought-out plan. The investors knew as they looked for a franchise partner that they wanted to find a product that could satisfy international markets and a franchisor who would support that kind of sales effort. These investors were based in theMidwest, but negotiated for exclusive rights to export the franchisor's product. Once they had obtained the franchise, and as they began to establish their business domestically, they also began to contact government experts in the U.S. Department ofCommerce and the U.S. Small Business Administration, as well as educators and local managers with international experience. Clear plans were developed outlining how they would position, market and distribute the product and which foreign markets would be targeted first. Even as they were building sales in one European market, they were attending trade shows and planning entry strategies in others.

By contrast, the second investor (Franchise B) started his business strictly because he wanted to leave a former employer.Of course, many small businesses get started this way; however, in this case no investigation of franchising alternatives was done. The business was located in an area that, as it turned out, contained virtually no consumers for the kind of service being offered. When this mistake was realized, it was too late to move -- the investor simply did not have the money or the desire to risk starting again.

Other examples further show the need for strategic planning and for developing a clear business plan. The owner of a business that seemed to be doing quite well in two locations was about to open in a third. The authors were called in to develop a benefits policy and discovered cash-flow problems that could be found only after operations had begun in the new location. After analyzing the situation, an expansion and financial plan was developed for the sound locations only. In another case, the authors determined that a business had purchased more equipment than was necessary to accomplish the current workload. After careful analysis, plans to make further purchases were put on hold, and the equipment available was used effectively to meet immediate needs.

A business enterprise is too complex to assume that failure to develop a sound business plan will be the cause for problems.Nevertheless, this failure often counts among the factors contributing to business difficulties. As Worth has said, Being a business entrepreneur today takes constant vigilance in order to be able to take advantage of new opportunities and the availability of new information and technology as they come into being. The first step in doing this is to have a plan.