Strategic Planning for Business
I call this report, Strategic Planning for Business, because although the business planning process itself is nearly identical to the simple plan as described in scenario no. 1, there is an added element here that is “strategic” planning in nature. This is the “Partnership” arrangement previously discussed in scenario no. 2. Let’s assume that you and a close friend are starting your basic coffee cart business together, and you will not be looking for outside financing right away. You, and your friend, can hammer out a business plan on a white board, or your lunch napkins, as long as you each have an identical understanding.
Of course you will want your attorney to prepare the proper partnership or corporate legal documents so you and your partner become legal owners. I strongly recommend that you do NOT try to prepare legal documents without a legal overseer. I have seen the trauma caused down the road by improperly prepared legal documents. You never know what events will change things in the future where you will need to fall back on your original documents. A simple partnership agreement or LLC does not cost that much to have an attorney involved, and it is worth it in the long run.
A More Important Document However, in this case of strategic planning for business, a more important issue needs to be addressed before you actually start on your business planning. You and your friend need to develop a document outlining which of you will be responsible for what functions of the business. This document could be called a “document of understanding”—or anything you want to call it. This is not a legal document, just a simple list outlining the division of work, and it could be written on scrap paper if you wanted. Everyone who is part of the startup needs to participate in the development of this document, and then sign it of course, to indicate they were a part of the discussions, and that they agree with the contents of the document. You cannot imagine how important this basic information could become when the business hits an inevitable bump along the way, and the finger-pointing starts. It would be at this point then, that you and your partner would sit down with the original “document of understanding” and review it alongside your simple business plan and rework the portion of your plan and/or assignment of duties that doesn’t seem to be working. It is the relationship you have with your partners that makes strategic planning for business work in this case. A few tweaks of your business plan and/or a small revision of your “document of understanding” may be all it takes to get the business—and your "partnership"—back on track. When your business grows enough to require the addition of outside capital—everything changes. What was fun and simple up to this point now becomes more complex and structured, because you now will have partners, or stockholders, who are strangers. They also usually do not totally agree with the way you run your business. Strategic planning for business will take on a whole new meaning and will be heavily influenced by your investors. The next report in this series on small business planning discusses the next step up in, Business Plans for Small Business. It involves a more formal form of strategic planning for business.
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3/29/12
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