When starting up a new business venture, expanding current operations or diversifying the current business our first actions, as owners of family and private businesses, are to seek advice as to the structure of the business. This is a legitimate course of action for a number of reasons including;
- The desire to get started quickly and leverage our current technical expertise to exploit the business opportunity
- Find the best way to leverage personal assets and raise the necessary capital for the business venture
- To protect personal and business assets
- The people we know are usually the Accountant, Legal Professional, Financier and Insurance Broker
Given this natural course of action what is proposed in this short article is to take a step back and think about how you can improve your chances of business success AND ensure that your external stakeholders have the best opportunity to provide value to your business. Strategic planning is the process that will achieve both of these objectives.
A more comprehensive article on strategic planning will be provided in a later publication however in summary a good plan will incorporate an analysis of the business environment and a feasibility assessment of your strategic options that will drive the company’s business model, corporate governance structures and systems and its risk management systems. It will also highlight the core values and competencies of the business.
Because of this planning (and thinking) behind the business the external stakeholders such as the Accountant and Solicitor will be able to provide advice on your legal and regulatory structures that are aligned to your company strategy and its operational capabilities. This will improve operating efficiencies as well as more comprehensively mitigate current and future risks.
From the perspective of your financier, they will be able to provide you with a funding bundle that will cater for your current and future requirements while affording you with the flexibility to operate effectively. In addition, the financier will have more confidence in the business because the plan highlights a deep understanding of the business environment and the company’s capacity to operate within this environment.
More importantly, the strategic planning process enables the owners and senior management of the family or private company to be clear in their direction which allows them to;
- Resource the business correctly in the current situation and be aware of future requirements
- Develop and implement efficient operating systems including policies and procedures
- Drive the company culture by clearly communicating the strategic direction of the business
- Manage client and supplier stakeholders consistently and professionally
- Segregate business functions in a manner that mitigates risk and facilitates partial fragmentation when the opportunity arises
Personal goals the owners of the family or private company can only be achieved if the cash generating business is profitable and achieving the return expected. Therefore comprehensive strategic planning will not only drive the profits it will also drive the structures of the business to ensure the shareholders are adequately protected. Finally, strategic planning will facilitate future succession planning, which can be built into the initial structures thus providing clarity and avoiding future conflict and economic stress.