If you fail to plan, you plan to fail. We all know the old saying – and now there is mounting evidence that shows that strategic planning for an SME leads to increased performance and better results.
However, a great many SMEs still do not develop strategic plans, or in some cases even a business plan, and the reasons why are not well understood.
For a lot of SME owners and operators, business performance often ranks far behind intangible goals such as self-direction, personal satisfaction and lifestyle.
Strategic planning may therefore have little value to owner-operators driven by such motivators. In this article we suggest that an owner’s aspirations for these intangibles, will succeed or fail on the basis of whether or not they strategically plan.
Will a Strategic Plan Help My SME Grow?
Despite their many contributions to the economy and communities, the SME sector is plagued by high failure rates and poor returns on investment.
So why is it that some SMEs are more successful than others?
Well, a comprehensive review into SMEs completed recently suggested that, among other things, a key determinant of business success lies in the absence or presence of strategic planning. Strategic planning is concerned with the setting of mid to long-term organisational goals, the development and implementation of plans to achieve these goals, and the allocation of resources necessary for realising these goals.
In a more practical SME sense, strategic planning is about competitive advantage. In other words, the purpose of strategic planning for an SME is to enable a business to gain as efficiently as possible, a sustainable edge over its competitors.
This view is supported by more studies that suggest that in respect to performance, strategic planning is generally more common in better performing SMEs. For example, SMEs that engage in strategic planning (compared to those that do not) are more likely to achieve higher sales growth, higher returns on investment, higher margins on profit and improved employee growth. SMEs that engage in strategic planning are also more likely to be more innovative, develop more new products, employ new process and management technologies, and achieve growth beyond their geographical region.
Most importantly, SMEs that engage in strategic planning are less likely to be among those that fail!
Claire Harrison is the Founder and Managing Director of Harrison Human Resources, a flourishing HR consulting business that sprouted in 2009 from Claire’s passionate belief that inspiring leaders and superstar employees are the key success factor to any business. With over 20 years’ experience, Claire has worked as a HR Director of multi-national organisations, as a Non-Executive Board Director, and a small business owner. Claire’s corporate career includes working with companies such as BHP, Westpac, Fonterra and Mayne Nickless.