The majority of small business entrepreneurs believe that the only tool they need to help their business thrive is a business plan. Oftentimes, the terms business plan and strategic plan are used interchangeably, which confuses entrepreneurs and leads them to believe business plans and strategic plans are the same documents. Many owners of small businesses believe strategic plans are only for large firms and don’t apply to their own small businesses. Others are overwhelmed by the prospect of creating a long-term plan. After all, every day is a new adventure in business ownership, so how could you possibly know what to expect in the future?

There are many misconceptions about strategic plans, how they differ from business plans, and how they can help your business succeed. As its name suggests, a strategic plan is nothing more than a plan; it doesn’t guarantee success or that you will achieve everything you put down on paper. Its purpose is to give you focus, direction, and the motivation to achieve the goals that might otherwise get lost in the craziness of everyday entrepreneurship.

This section will teach you the difference between strategic plans and business plans. It will also teach you how to create your own strategic plan and how it can be an effective tool for your business.

Strategic Plan vs. Business Plan

By now, you are probably familiar with what a business plan is and how a business plan can help your business by attracting lenders, investors, and other partners by demonstrating the viability of your business idea. Click here to learn more about creating a business plan. What you may not be familiar with is how a strategic plan can serve as a useful tool for growth and results within your company.

A strategic plan is generally shorter and less detailed than a business plan and is designed to serve as a framework for future decisions within your company. Rather than focusing on the small details of doing business and the viability of your business idea, a strategic plan is directional, conceptual, and visionary. It sets realistic objectives for your company to achieve within a medium- to long-term period. While some companies develop a 10-year strategic plan, most small businesses would benefit from creating a plan focused on the next 3 to 4 years.

A strategic plan is used to keep a company on track, to keep programs moving in the right direction toward specific objectives. It defines the long-term vision and the general course of action to be taken to achieve that vision; a business plan, on the other hand, focuses on current tasks and details. For example, a strategic plan might read, “In four years, our company will have a nationwide presence by selling our Glow-in-the-Dark napkins through a chain of popular party stores.” Your business plan might read, “We make Glow-in-the-Dark napkins that are marketed to children and teens. Our product is unique because no other napkins glow-in-the-dark and cater specifically to making mealtime fun for kids."

Although some people say that a good strategic plan can serve as the framework for developing a business plan, it is generally easier to develop a strategic plan after the business plan is already complete and after your company has been in business for a period of time. Although a business plan is crucial prior to opening your business in order to acquire capital and attract investment, a strategic plan should be developed by assessing the strengths and weaknesses of your company once you’ve attained some experience managing it.

A strategic plan should not be developed by one or two persons in a company and stored on a shelf where no one reads it; instead, it should be written together by all of the key managers and should be distributed to your company’s staff, who are responsible for following the guidelines and implementing the programs defined by the plan. Strategic planning, when done right, can help your company succeed by highlighting the company’s strengths, identifying opportunities for success, and preparing your company to survive in the competitive business environment.

How to write a strategic plan

Writing a strategic plan is an opportunity to step back from the everyday tasks and current issues of your business to look at your ultimate objectives and what you hope to achieve in the long run through your business. Thinking strategically is a key tool to managing the growth of your business and can actually make many business decisions easier. As an example: GloWipes manufactures glow-in-the-dark napkins and distributes them through party stores nationwide. GloWipes’ long-term objective is to produce the leading party napkin and have a variety of shapes and sizes available. GloWipes receives a request to begin developing glow-in-the-dark paper towels and considers the project due to potential revenue. Producing paper towels would divert valuable resources away from marketing and producing napkins, however, and would steer GloWipes away from their ultimate objective. It is an easy decision to turn down the request.

To write an effective strategic plan, you should first examine the current status of your business, including its strengths and weaknesses, threats and opportunities, and its current strategies for doing business. Assessing the business in its current state will help you identify what needs to change in order to achieve long-term goals. Your strategic plan should have seven primary sections:

• Vision Mission Values
• Objectives
• Strategies
• Goals
• Implementation

There is no set formula for the way in which a strategic plan should be developed. Formulating your overall objectives first, for example, may help in the creation of your vision. Because all of the components of a strategic plan should align with one another, it may be helpful to create a chart that defines objectives, identifies corresponding strategies and goals, and details the implementation process for achieving the above objectives.

However you decide to create your strategic plan, remember that it is a changeable instrument. Companies change strategies and direction frequently. Use your strategic plan as a tool for decision-making, benchmarking, and performance assessment, and you will see just how useful it can become.

:: Vision

The vision of your organization is just that—a vision. It is how you envision your company to look three or four years down the road. Your vision should state where your company is headed, and should be vivid and memorable. It should capture the ideal future of your company. Imagine a game of charades, and the way people use clues to understand the object being described. It is round…It has a nose…It is four letters, starts with f… It’s a FACE! Like a game of charades, your vision should be a creative description that people can picture in their heads. Vision statements are often dry and fail to motivate the employees of a company to work toward that vision. For example, a dull vision statement might read: “The vision of our company is to become the leading producer and distributor of Glow-in-the-Dark napkins both nationally and internationally.” A better vision statement might read: “Our vision is for GloWipes Glow-in-the-Dark napkins to be the #1 fun napkin used worldwide!”

:: Mission

While the vision statement is the “where” (where you are headed), the mission statement is the “what”. It describes what you do and can be created before or after the vision statement. Your mission statement should make employees excited about the role of the company. Your mission statement should describe your primary action or activity without being overly detailed. Including too much detail in your mission statement will require it to be rewritten every time your goals change. You want a mission that will be current, flexible, and—like your vision statement—be motivating to your employees. An example of a poor mission statement might read: “The mission of GloWipes is to produce and sell Glow-in-the-Dark napkins in 8 colors and 2 sizes through our national chain of stores and mall kiosks.” A better mission statement might instead read: “We make parties brighter and meals more fun with a variety of Glow-in-the-Dark napkins that everyone can enjoy!”

:: Values

The values of your organization are your ethics, standards, and beliefs that guide your organization. Generally, companies will create a list of five to ten values that the company will follow as it conducts business. Employees should have a copy of the company’s values at all times to remind them how your company operates. Examples of common business values include:

• We will always conduct business fairly.
• We will treat all with respect.
• We will help our employees reach their full potential.
• We will meet our customers’ needs to the best of our ability
• We are dedicated to improving the communities in which we operate.
• We are committed to delivering products of the highest standards.

When developing values for your company, think about the foundation of your business’ success. For example, your company’s success relies on your staff and whether they are trained, motivated, encouraged, and respected. For another example, your company’s success relies on your customers and whether their needs are met, exceeded, and anticipated. Your values are based on how you treat the individual stakeholders of your company. Who does your company depend upon for success?

:: Objectives

When defining the medium- to long-term overall objectives of your company, ask yourself, “Where do you see your company in three to four years?” This may sound like the vision statement you created earlier, and it is the same type of thinking, but this time you need to be more specific. Defining your objectives can be done by taking into consideration your company’s growth, profitability, offerings, markets, and other fields in which your company evaluates its success. What do you see your company accomplishing in three to four years for all of these categories? Will you be an international, multi-billion dollar empire, offering twenty-eight varieties of Glow-in-the-Dark napkins to seventeen countries on four continents?

Your objectives should be realistic, and they should represent the growth that your company is on track to achieve. If your company is currently selling to a market of 2,800 individuals in one American city, you probably will not achieve multi-billion dollar status within three years. It may be feasible for your company to enter the market in four other cities, however. Make sure the objectives you set are ambitious but attainable.

:: Strategies

Your strategies are the methods by which you will achieve your objectives. They are the practices you will follow, the processes you will employ, and the ways in which you plan to succeed. If your objective states that your company will gain a presence in four states, your strategy would describe how you would achieve that. Would you sell franchises in those markets? Would you buy out floundering competitors in those states? Would you reach those states via an online website and catalog? The strategies you choose to employ will define the programs and actions your company will implement from now on, so make sure they are consistent with your capabilities and capacities. For example, your objective is to sell GloWipes in all 50 states, and your strategy is to set up stores in every mall in each state. Ask yourself if you have the manpower and the resources to set up and staff these stores? Perhaps a better strategy would be to distribute GloWipes through the leading chain of party stores.

As you progress throughout your strategic plan, you should begin to see how each category aligns with the next, and how a chart may be a useful tool for organizing your plan.

:: Goals

People often consider the terms “goal” and “objective” to mean the same thing. Oftentimes, the only difference between the two terms is in their context. In the context of a strategic plan, objectives refer to the overarching objectives you hope to achieve in three or four years, and goals are used to measure your progress in the meantime. Goals are specific, quantifiable, interim benchmarks you can use to evaluate your progress and assess your company’s overall performance toward its objectives. For example, if your company’s overall objective is to expand into six markets within three years, your goals might be to expand into one market in year 1, two additional markets in year 2, and three more markets in year 3. You will have reached all three goals and, in doing so, achieved your final objective.

So how does everything fit together so far? Taking the example of GloWipes, you have determined your objective is to sell GloWipes to all 50 states. You have decided the best strategy to do so is by distributing your napkins through the leading chain of party stores. Your goals in this scenario might be to distribute napkins to 10 states in the first year of sales, 25 states in the second year of sales, and all 50 by the third year of sales. Those are quantifiable benchmarks that you can evaluate easily by saying, did we reach our goal?

:: Implementation

Once you have set your goals, you need to determine how you will reach them. Who will be responsible for achieving each goal? How much money will be dedicated to reaching each goal? What is the timeline for reaching each goal? These questions should all be answered in this section. Be as specific as possible in the implementation of your strategies because it will eliminate confusion and ensure that everyone fully understands their role in achieving the company’s objectives.

As you finish your GloWipes Strategic Plan, you must complete the last section: implementation. You have determined that your goal in year one is to distribute GloWipes to party stores in at least ten states. How will you achieve this? Your Director of Product Development will create personalized napkins with state symbols that glow in the dark. You will devote a month to this development and $250,000. Your Director of Marketing will do market research on the first ten target states and will develop marketing campaigns for each state. Maybe you will target Washingon, DC, first because it is an easy way to reach residents in Maryland and Virginia as well. Or New York to reach residents in Connecticut and New Jersey . Targeting just two markets will already help you reach six states. You will spend $100,000 on the advertising campaigns for NY and DC, and $50,000 on campaigns in five other states. Your timeline for implementing the marketing plans is three to six months, and you plan to have the napkins in stores within eight months. And so on and so on.

You can see how the plans for implementation will come easily once you have defined your objectives, strategies, and goals. Once you have completed your strategic plan, share it with your entire company and make sure everyone understands the direction in which your company is headed. This important resource will answer many of the questions you encounter in business everyday. Ask yourself, is this in line with our strategic plan?

For additional help in preparing your strategic plan and growing your entrepreneurial venture, check out TVC’s Veteran Virtual Business Incubator, a one-stop resource for Veteran entrepreneurs!