An Awesome Asset

Failure to plan is planning to fail. The old cliché is as true today as ever.

Having spoken to numerous small and mid-sized CEO’s and business owners over the last few months, I’m startled at how few have well-developed strategic plans in place.

Many firms have made massive investments in inventory; capital equipment and large payrolls yet have not built a framework for their future.

One of the most important assets a company owns is the ability to develop and execute a strong strategic plan.

Here is why this important asset is missing in many firms.

Arrogance – It has been said that success breeds success. That is true, until it doesn’t. Over confidence or arrogance that the business’s past success will continue in perpetuity is a leading indicator that the business will likely hit a wall. Nothing lasts forever.

Avoidance – Not facing hard facts about company financials, competitors, talent required to remain relevant and business systems needed to manage and grow the company will lead to troubled times.

Poor Anticipation – A hurricane is a wonderful metaphor for the marketplace. Through modern-day Doppler radars, meteorological instruments and satellite imagery, low pressure systems that become devastating hurricanes can be identified well in advance…and planned for. Similar predictive analytic tools, market trending processes and “healthy paranoia” is extremely useful in preparing for a potential disruptive market shift. Ignoring the signs and then grasping for “hail mary” solutions is a sure sign of pending corporate destruction.

Sales will Cure All – Some CEOs and founders believe that as long as sales keep growing, the business will be healthy. False. Exponential sales do not equal solvency.

Here is a directional formula to determine the value of a well-executed strategic plan. Multiply the firm’s annual sales by the desired growth factor.

For example, if a company is currently generating $30M in annual sales and the CEO, owner would like to grow the business by 10%, a well-developed and executed plan is worth $3M dollars. Now take that $3M and figuratively add it to the assets on the balance sheet.

Conversely, do the opposite if a strong strategic plan does not exist. How many CEO’s or business owners would knowingly take a $3M hit on their balance sheet? Yet too many do.

Isn’t it time your company builds and executes a solid strategic plan?