Editor's Note: This is the fourth in a multi-arc series. In the installments, B2B CFO's Don King addresses cash, financial performance, strategy and then pulls everything together in a meaningful way. It is not all about spreadsheets, financial statements and bank loans. A company is an organization whose complexity changes as it grows. Some things become easier and others more complex. Recognizing and addressing these changes is the key to long-term success.
A privately held company that has a strategic plan is more likely to have a clear sense of direction and purpose. It also is more likely to have a mission, vision and long-term goals that align everyone in the organization toward a common objective. It helps employees understand where the company is heading and how their individual efforts contribute to the overall success of the company.
With a strategic plan in place, decision-makers can evaluate choices based on their alignment with the company's long-term objectives, ensuring that decisions are consistent and coherent. A strategic plan serves as a framework for making informed decisions. It helps in prioritizing initiatives, allocating resources, and identifying potential risks and opportunities.
This ensures that financial, human and other resources are allocated in a manner that supports the strategic goals of the organization.
Performance Measurement — A strategic plan provides a basis for measuring and evaluating the company's performance. By defining specific goals, targets, and key performance indicators (KPIs), it enables monitoring progress and assessing whether the company is on track. This allows for adjustments, corrective actions and celebrating achievements, enhancing overall performance management.
A strategic plan enables a company to be proactive and responsive to changes in the market, industry or internal factors. It provides a framework for monitoring and evaluating the environment, identifying emerging trends and challenges, and adjusting strategies accordingly. By being adaptable, a company can maintain its competitiveness and sustain growth.
A strategic plan serves as a communication tool, both internally and externally. Internally, it helps align employees, departments, and teams around common objectives, fostering collaboration and constructive collaboration. Externally, it communicates the company's direction and value proposition to stakeholders such as investors, bankers, customers and vendors, enhancing their confidence and support.
By focusing on the long-term, the strategic plan promotes long-term sustainability by focusing on the big picture. It helps companies avoid “short-term thinking” and reactive decision-making that may compromise long-term success.
Overall, a strategic plan provides a roadmap for a company's success. It enhances decision-making, resource allocation, adaptability, communication, and performance management, ultimately contributing to the company's growth, profitability and long-term sustainability. A company that has a strategic plan in place is likely to create more value than a company that does not.
It is difficult to discuss the strategic direction of a company without including the most important strategic decision a business owner will make, what is next for the business? There are many options, sale, transfer to family members, sell to employees, status quo. There are many options.
With a strategic plan in place, decision-makers can evaluate choices based on their alignment with the company's long-term objectives, ensuring that decisions are consistent and coherent.
Regardless of the desired outcome, there is much work to be done to maximize the value of the company, facilitate a smooth transition, attract qualified buyers, expedite due diligence, maintain control, mitigate risks and optimize the outcome of the sale. By investing time and effort in preparing a business, the likelihood of a successful outcome is increased.
Regardless of the path chosen, continuing to operate the business, or selling the business, maximizing the value of the company will have a favorable impact. If the goal is a transaction, maximizing the business’ value will generate the highest possible return. By preparing the business for sale, you can identify and address areas of improvement, enhance its attractiveness to potential buyers and increase its valuation.
A well-prepared business attracts a broader pool of qualified buyers who are willing to pay a premium for a well-structured and well-documented business. By presenting a clear financial history, growth potential, a strategic vision, and a compelling value proposition, you can capture the interest of strategic buyers, investors or other entrepreneurs who see the potential in your business.
Don King is a Partner with B2B CFO® Website: My Expertise Hub™. We provide Strategic Business Advisory Services to owners of privately held companies. We focus on increasing cash and company value. By redefining the way that these services are provided, we have created a new industry, which we dominate and lead. With a nationwide presence, B2B CFO® is the largest company of its kind in this industry.
Would you like to learn more on this topic? Register for Don's webinar — "A Strategy for Success for Privately Held Companies," where he'll provide an in-depth look at the things that mean the most and are most impactful to business owners:
- Cash — where does it come from and how is it used? Are we matching short and long term financing with short and long term uses?
Financial performance — a review of the Income Statement and Balance Sheet. How do the financials compare to related companies in the market?
Strategic View — where do we go from here? Where is the company in three, five, 10 years and how do we get there?
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