The COVID-19 pandemic still rages around the globe, affecting lives and hurting businesses. But the rapid rollout of vaccines offers hope that we’ll return to “normal” life sooner than later. As more people start to engage in life outside their homes-turned-pandemic-bunkers, the economy will rebound. To make sure your business is positioned for success, plan now for your return to post-pandemic life.
A Solid Financial Strategy Starts Here
Every good Chief Financial Officer knows that your ability to grow your business hinges on your ability to strategically leverage your financial assets. What makes your financial strategy “correct” depends on your organization’s strategic plan. Financial assets should be leveraged to turn your strategic plan into a reality.
Your strategic plan spells out where your company is headed, which target audiences you’ll serve, how you’ll serve them, growth opportunities, and potential threats you need to watch. As a whole, this information should guide how and where you invest your money. Your goal is to maximize the return on your investment, while minimizing possible losses.
Let’s explore the important components to include in your strategic plan. We’ll also cover the questions you should ask as you update your plan, and how to use your answers to guide your financial investments.
Strategic Plan Component 1: Mission and Vision
Your company mission defines the reason your company exists. Your vision statement turns this mission into a target, articulating where you want your organization to be by some future date (e.g., in five years).
Considering what happened in the past year, do you need to update your mission or vision? For example, having survived a year of the pandemic, perhaps you realize that you want to serve a new market. Perhaps you have identified a new way that your company can serve the world. Take your insights into account, and update your mission and vision accordingly.
Strategic Plan Component 2: Core Values
The core values section of your strategic plan outlines what matters most to your company and team. Examples might include having fun, creating a work-life balance, honesty, continual learning and improvement, humility – you get the idea. Looking back over the past year, have your values shifted? For example, you may realize how important it is for you to show appreciation, as well as to remain flexible.
Strategic Plan Component 3: Strengths, Weaknesses, Opportunities and Threats (SWOT)
A SWOT analysis takes stock of the pros and cons of your organization’s current position. Surviving the pandemic to date has certainly provided clarity about where you stand in these four critical quadrants. Update your strategic plan with what you’ve learned.
Strategic Plan Component 4: Objectives, Strategies and Tactics
Your strategic planning objectives spell out what you’ll focus on to achieve your vision. Strategies are the means you’ll use to achieve the objectives. Tactics spell out the “who, what and when” needed to achieve the strategies.
For example, your objective might be to increase revenue by 10 percent. A strategy to achieve that objective might be to market a new product to your existing customer base. The tactics would include defining what you need to get done to execute your marketing plan, when the various steps need to be completed, and who is responsible.
Now that you’ve updated your vision for your business, how do you need to adjust your objectives, strategies, and tactics? How do you need to do business differently?
Strategic Plan Component 5: Measurements and Funding Streams
If you want to know if your plan is successful, you need to measure progress regularly. What data will tell you if you’re on track for success? What measurements will provide that data? After surviving the pandemic, do you see any new measurements that you should be taking – or any that don’t give you the feedback you need?
In this section of your plan, also include financial analysis. Look at past performance, as well as performance during the pandemic. What trends do you anticipate as we move forward into economic recovery?
When preparing your financial projections, do three scenarios. Start with a “middle of the road” scenario, then revise your projections to have a “best case” scenario, as well as a “worst case” scenario. Think through how you’ll respond if things don’t work out as well as you hope. Also plan what additional investments or expansions you might make if things go better than expected. By doing the heavy lifting of planning multiple scenarios now, you’ll be prepared to respond quickly now matter how your actual results turn out.
Pick the Financial Strategies to Achieve Your Goals
With your strategic plan updated, it’s time to set your financial strategy. Your strategic plan should guide every financial decision you make. For example:
- Marketing and client acquisition. Are you targeting the right audience to achieve your mission? Will the campaigns you’re planning reach the right audience for your products and/or services?
- Revenue sources. Do you need to develop new revenue streams and/or eliminate existing products or services to achieve your mission? Do your financial projections support these changes?
- Expenses. Do you anticipate increasing your expenses, or are there ways to trim? Be sure to consider expenses associated with any new revenue sources you’re considering.
- Personnel. Be cautious about increasing personnel. Before you commit to adding positions to your team, identify how your new hires will contribute to achieving your vision. Before making the financial commitment to hiring a candidate you like, take a step back and ask whether that individual seems to align with your values.
- Systems and procedures. Investing in these areas can make you feel more efficient and accomplished. But the most important question to ask is whether investing into systems and procedures will help you meet your objectives. Before buying new technology, ask whether the new tool or software is “nice to have” or an investment that will pay off? Also look at the way you do business. How can or should you adjust your systems and procedures to deliver more effectively and efficiently on your mission?
Ways to Fund Your Plans
Several forms of government aid were made available to small- and medium-sized businesses during the pandemic. The Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) are two of the best-known sources.
Per the CARES Act, PPP loans had to spent within a certain time period and on a particular set of expenses. EIDLs were given with fewer restrictions, and many business owners set aside their funds to use at a later date.
If you have EIDL funds on reserve, now is the time to think about deploying the money to fund your post-pandemic journey to recovery and growth. If you didn’t qualify for an EIDL, now is the time to explore all financing options that are available to you. These might include a cash reserve, lines of credit, and perhaps even credit card financing. Ask your strategic financial advisor for help in determining which path is best for your business.
With your new plan fleshed out and financing identified, it’s time to put your plan into play. Start slowly. Test your ideas to make sure they work before going full throttle.
For example, if you’ve identified new revenue sources to add to your business, make sure your target audience is receptive and actually purchases what you’re offering before going all in on rolling out the new products and/or services. If testing doesn’t produce positive results, keep experimenting with your offer, price point, positioning, and even the audience.
Preparing your strategic plan will take a fair amount of time. Done properly, plan on three months. Testing your ideas will take another three to six months, maybe even longer. Only once you’re confident that your plan and strategies are solid will it be time to launch in full. By that time, with luck and a good vaccination plan underway, the economy will be picking up.
Be Ready – Because Recovery IS Coming
When it comes to proper business financial management, most business owners focus their attention on accounting. But strategic financial planning is just as critical.
Keeping accurate financial records is the process of looking backward at what already happened. Strategic financial planning and management looks forward to the bright future that awaits your company. Accurate recordkeeping is important. But more important right now is charting a course to achieve your goals and bounce back from the pandemic stronger than ever.