By: Andrew Neitlich

August 16th, 2004

Reader Rating: 9.5

Executives at large corporations and entrepreneurs in emerging companies struggle with the same question: "How do I write a strategic plan that actually gets implemented?"

A solid strategic plan delivers the following benefits:

1. You focus your time and energy on activities that are most likely to achieve your goals.


2. You know how to allocate resources.


3. You put a solid strategy in place to set your business apart from the competition.


4. You can communicate your plan to employees, and hold them accountable for results.


5. You can track the results of your efforts and make mid-course corrections to get back on track if you need to.


6. You can adapt your plan to create a second business plan to raise investment capital or get a business loan.

Unfortunately, too many plans sit on shelves collecting dust, and fail to take advantage of these benefits. There are four reasons why.

Why Are Business Plans Ignored?

1. Overemphasis on the Academic

Many entrepreneurs write research reports instead of strategic business plans. They write dozens of pages about the market, the competition, SWOT analyses (Strengths, Weaknesses, Opportunities, and Threats), industry analyses, and detailed financial projections. Or, they use strategic jargon that they read from a smorgasbord of so-called gurus: "five-part competitive analysis," "first-mover advantage," "sustainable competitive advantage," "leveraged revenue model," and on and on, ad nauseum.

Unfortunately, these analyses do not have much to do with getting out into the marketplace and attracting new business. They are interesting, and might get an "A" in a business school class, but they don't guarantee results.

Please don't misinterpret this point. As we'll see, giving thought to your market and competition is important. You need to know whether the market is big enough, and has enough room, for you to achieve your financial goals. But you don't need to obsess. This type of calculation is easy to do in a simple back-of-the-envelope way, and then you can move on.

2. Incomplete Plans

A sound strategic business plan must cover three areas. If you miss any of these areas, your plan will be incomplete and will not be nearly as powerful as it needs to be. Later parts of this article will cover each area in depth, but let's take a brief look at them now.

First, you have to lay a sound strategic foundation. Your strategic foundation:

• Sets out your vision and specific goals for your business
• Describes your target clients, their current and emerging needs, and your target project
• Defines what sets your business apart -- or your edge -- in your clients' eyes
• Crafts your positioning statement, or irresistible marketing message that will attract desirable new clients to you
• Lists current hurdles that are keeping your from achieving your goals and vision

Second, you need to identify a set of priorities that will help you to make your strategic foundation a reality. This includes:

• Campaigns to become visible within your target market
• Ways to strengthen your business relationship with high-potential current clients
• Priorities to improve your capabilities to better serve clients
• Strategies to build an organization that can operate without you

Finally, you put all these elements together in an action and accountability plan that details who does what, by when, in order to achieve your business goals. For larger firms, this action plan sets out specific accountabilities, resource allocations, and organizational structures to get the work done.

These three elements -- strategic foundation, priorities, and action plan -- make up a complete strategic business plan. Yet, many entrepreneurs skip one of these, which is why their business plans never get implemented. For instance, some jump right into an action plan, without giving enough consideration to their strategic foundation. As a result, their plan does not flow naturally from a consistent strategic vision.

Similarly, many organizations create a set of priorities, but don't assign specific people to implement those priorities. They also fail to free up those people to focus on those priorities, as opposed to their previous job descriptions. Therefore, the plan remains theoretical -- a nice thing to do, but impossible without specific roles, responsibilities, and time frames in place.

3. Confusing a Strategic Business Plan for Management with a Business Plan for Lenders/Investors

While there is significant overlap, a strategic business plan for you as the owner of your firm is very different than a business plan whose goal is to raise money from investors or lenders. This article focuses on the first -- a business plan that helps you to plan and organize your business activities -- because all entrepreneurs should construct a strategic business plan, while fewer will need to raise capital.

To clarify, a good business plan for investors or lenders answers three questions:

• How big is the opportunity?
• What is management's ability to take advantage of the opportunity and execute effectively?
• What is the financial deal to investors to make the investment worth the perceived risk?

That kind of plan persuades investors that you can take advantage of an opportunity in a way that will generate significant rewards for everyone involved. You lay out a specific plan of attack, but more in the form of milestones that tell investors that your strategy is on track.

This article talks about a business plan that you, as the owner of the firm, can implement to achieve your goals. This type of business plan becomes a living, breathing document hat helps you organize your time and resources. Therefore, the level of detail is different. It can be adapted for potential investors or lenders, but is meant first and foremost to be a tool for you and your management team.

4. Forgetting that You Only Need "X" Clients or Projects Per Month

Finally, remember that your plan is for a Web design/development firm, not the next Microsoft (yet). You only need a finite number of clients or projects per month to meet your financial goals. Moreover, in most markets, that number is achievable by those Web design/development firms that make business development a priority.

Therefore, your plan should be designed to help you achieve your numbers. You don't need to generate one billion dollars within the year.

For instance, I used to work with a savvy entrepreneur who ran a multi-million dollar service firm. He talked about his secret of success this way: "Each person in my company only needs 8 projects a quarter to succeed. We're not trying to get 100, or even 20 projects. Just 8. We know that's achievable, and everything we do aims at hitting that number."

When most people hear this story, they relax. They realize that it's great to set ambitious goals, but they don't have to get manic. Your plan will be simpler and easier to achieve if you can fill in the blanks in this sentence:

"To be successful, I only need 'X' new projects or clients per month."

Create Your Business Plan

Part 1: Strategic Foundation

Alice came to the fork in the road.
"Which road do I take?" she asked.
"Where do you want to go?" responded the Cheshire cat.
"I don't know," Alice answered.
"Then," said the cat, "it doesn't matter."
- Lewis Carroll, Alice in Wonderland

As discussed earlier, your strategic foundation explains what kind of firm you want to create, and some key elements that you need in place to get there. Without these elements, you are like Alice at the fork in the road. With that in mind, this section of your plan should include the following areas:

1. What is your vision for your firm?

   Write a brief paragraph that describes what you want your company to look like in 3 to 5 years. What will your firm be famous for? What will be your major accomplishments? How many people will be working for you? What kinds of clients will you be serving? Will you have more than one office and, if so, where? What will be your role in the company, and how will you spend your time? These are the types of questions your vision statement should answer.

2. What are your specific financial goals over the next few years?

   Your answer to this question is one of the most important in your plan. Everything you write after this point should directly tie back to helping you achieve your financial goals. Aspire to earn the income that you deserve. What do you want to earn over the next 12 months? Three years from now? Five years from now? Write it down, so that your plan will help you make it happen.

3. What is your target market?

The Sitepoint article World Domination for Small Web Businesses [1] explains the importance and benefits of having a sound target market. Your plan should define your target market, then answer three questions about the people/businesses in your market:

First, is the target market large enough to allow you to achieve your financial goals? For instance, let's say you're targeting independently owned real estate agents within 50 miles of you. Suppose there are 2,000 agents. Further, assume that your average project nets you $5,000 and that you intend to earn $100,000 this year. You therefore need 20 projects this year. That represents a 1% penetration rate (20/2,000), which seems reasonable. Beware of situations where you need more than 10% penetration, unless you have unique relationships or proprietary technology that is indispensable.

Second, what are the current and emerging needs of your market? Take a few clients or industry leaders out for lunch and interview them to understand their needs. Too many IT professionals follow the cliché: "Here's my solution, now what's your problem?" It is essential that your plan begins with what your target market needs – in their language, from their perspective. For instance, real estate agents don't necessarily need a Website, but they do need strategies to get them more listings so they can increase their commissions. And, increasingly, they face a saturated market -- attracting sellers and buyers is becoming more and more urgent.

Third, what attributes make up an ideal client and a "nightmare" client? It's important to have in mind a picture of these extremes, so that you can focus your efforts on attracting the most desirable clients and also know when to say, "No!" Write a statement defining each. Criteria to consider include: urgency of their problem, life cycle of the business, their personality style, their budget and authority, fit with your capabilities, visibility in your target market, likelihood of establishing a long-term relationship, likelihood of getting referrals, size and type of project, and ease of working with them.

4. What is your edge?

   Most Web design/development firms come across as generic. With your plan, you have an opportunity to define an edge that will set you apart from your competition. Consider your target market's current and emerging needs. Then do a little (but not obsessive) homework to discover how your competition positions their services.

   With that information, define an edge that will set your firm apart and that matters to your prospects. Examples can include:
   

   • a proprietary application or technology
   • an unbeatable, iron-clad guarantee
   • depth of experience in a specific industry
   • unique capabilities and resources that no one else has
   • a consistent methodology that leads to faster, cheaper, better design
   • proven creative leadership (backed up by awards or a client list)

   Don't worry if you don't actually have an edge in place. The purpose of your plan is to identify it first, then figure out how to make it real.

5. What hurdles do you face in achieving any of the above?

   The strategic foundation piece of your plan concludes with hurdles you face in achieving your goals and vision, reaching your target market, meeting their needs, or setting your firm apart. You will address these hurdles in the next section. Typical hurdles include:

   • The need to develop new capabilities and skills to serve current and new clients
   • Ineffective business development, or not enough resources devoted to business development
   • Lack of internal systems to leverage your time

Part 2: Priorities

You now have a good idea about where you want your company to go, and what might be standing in its way. Now it is time to identify a set of priorities to help you achieve your goals and vision. In this part of your business plan, there are five types of priorities you should identify.

1. How can you better serve your best clients?

   In most well-run businesses, 20% of clients provide 80% of revenues. It is crucial for you to know who these clients are (and could be), and develop a plan to strengthen your relationships with them. Take some time to review your client list, and identify clients that have the potential to hire you for significant follow-on work. Step into their shoes to understand their top needs, and how you can help them succeed. Develop a strategy to become a "trusted advisor" to them, so that they call you first when they have a need, or want to brainstorm about ways to solve their problems.

   In summary, this part of your plan should list your core clients, their needs, and specific action steps you can take to strengthen the relationship. Also, set specific financial goals with each of these clients, so that you can begin to track projected revenue in the coming year.

2. How can you attract more new clients from your target market?

   List the campaigns and tactics you will use to get visible in your target market, and achieve your financial goals. Most IT professionals have the opportunity to ramp up their marketing activities by employing any of the following tactics:

   • Newsletters
   • Speaking
   • Seminars
   • Articles
   • PR/Publicity
   • Direct mail
   • Targeted advertising
   • Trade shows
   • Referral strategies
   • Hiring a salesperson
   • Telemarketing
   • Research studies
   • Community service
   • Reaching out to specific clients you want to work with
   • Any of the numerous other marketing tactics described in books like Guerilla Marketing, by Jay Conrad Levinson

3. How can you attract more new clients from outside your target market?

   You don't need or want to put all of your eggs in one basket. I recommend that you target 70% of your business in your core target market, and leave another 30% of your business to clients that come from outside your target market. That way, you can identify your next target market, while also diversifying your revenue sources. This approach also lets you take advantage of people you know who might refer you work, even if it is outside your core market.

   So your plan should describe where you think this additional 30% might come from. Usually, the answer is: referrals. So, list the people in your network, as well as influential people you need to meet who can send you referrals. Come up with a strategy to approach them and persuade them to exchange referrals and leads with you.

4. What new capabilities do you need to build in your firm?

   You developed an understanding of your target market and their needs in the first part of the plan. You also identified the edge you need to have in order to succeed in your market. To make this edge a reality and to serve your market, you might discover that you need to enhance your capabilities. In this section of the plan, take some time to describe these new capabilities, and how you will develop them.

5. What new systems do you need in order to leverage your time and grow your organization?

   The most successful businesses operate independently of the founder. Part of your strategic business plan should identify how you can leverage your time, so that you're working on the business instead of in it. Ideas include:

   • Marketing systems that automate your business development activities (see the Sitepoint article, Aspiring Towards Auto-Pilot [2])
   • Financial systems that handle invoicing for you
   • A methodology that ensures consistent processes and service to clients
   • Templates and products that allow you to create something once and sell it again and again
   • A leadership team that handles day-to-day operations

Part 3. Action and Accountability Plan

The final part of your plan puts it all together in a manageable action plan. You should develop an action plan for the entire year. However, pay particular attention to the next three months. Then, as each quarter comes to a close, assess your plan and update it for the next quarter.

As you develop your action plan, be sure to tie it back to your original goals. Of course, budget also comes into play, and may require you to refine your goals. In this sense, each part of your plan connects to the other, as part of an iterative process.

There are three parts to your action plan:

1. Develop a monthly business development action plan. List each month across a spreadsheet. List each marketing activity as rows going down. Include activities targeted to current clients, your target market, and new business outside your target market. Then indicate which activities you will do during each month, along with budget and notes about any new marketing collateral you might need to create to successfully complete these tasks. This plan gives you a bird's eye view of all of your marketing activities, so that you know what you need to do, by when.
2. Develop an action plan to build any new capabilities you identified. List the capability, the action steps you need to take, who will complete them, the budget, and the deadline.
3. Develop a similar action plan for new systems you want to put in place.

Conclusion: Start Writing Your Plan Today

The process of writing the plan is often more valuable than the plan itself. That's because the process focuses your thinking, and challenges you to answer some fundamental questions about your business.

Start writing today. You can write the plan on your own, but it's better to work with other people to test your ideas. If you have a management team, you can work with them to write your plan. I know many entrepreneurs who spend a weekend with a colleague, and they work together on each other's plans, like a strategic retreat. Or, you can hire a consultant/coach to walk you through the process.

Remember that quote from Alice in Wonderland. Too many of us are like Alice at the fork in the road, not sure where we want to go or how we will get there. Stay out of the rabbit hole and write your plan today.

[1] http://www.sitepoint.com/article/small-web-businesses
[2] http://www.sitepoint.com/article/automatic-marketing