For small and medium-sized enterprises (SMEs), strategic planning can often be overlooked in day-to-day business. Yet it is a crucial element for success: research shows that companies with good strategic planning perform better than those without. Strategic planning helps SMEs to focus on their long-term goals, set clear objectives and develop strategies to achieve them. It enables SMEs to identify areas of growth and capitalize on opportunities while avoiding potential pitfalls.
With thoughtful strategic planning, SME owners have a roadmap for success that helps them guide their business through good times and bad.
Understanding strategic planning for SMEs
Strategic planning is a process that helps SMEs identify and assess their current situation, set goals for the future, and develop strategies to achieve them. This involves understanding the company’s internal and external environment, including its strengths, weaknesses, opportunities and threats. In addition, strategic planning takes into account technological changes, customer preferences, industry trends and economic conditions.
How strategic planning differs for SMEs
Strategic planning for small and medium-sized enterprises (SMEs) differs from that for large companies. SMEs typically have fewer resources, a smaller business scope, and a smaller market share than larger companies. Their strategic plans must be tailored to meet these unique challenges. In addition, decision-making processes in most SMEs are more streamlined and efficient due to their small size. This enables faster implementation of strategies that allow SMEs to respond quickly to changing market conditions or competitive threats. Because today’s business environment is changing so rapidly, SME owners must be able to react quickly and adapt their strategies accordingly.
Remember, good strategic planning helps to respond better and faster by providing insight into potential opportunities or risks before they arise.
The current state of Strategic Planning adoption by SMEs
Despite the clear benefits of strategic planning for SMEs, many owners still fail to adopt this vital practice. This is partly due to a lack of time, tools, data, and insights needed to make informed decisions or even access primary data required for good strategic planning. Without these elements, it can be difficult for SME owners to understand their current position and formulate strategies to lead them toward success. As such, they may find themselves stuck in a cycle of reactive decision-making instead of proactive problem-solving.
Learning: Block dedicated time (3 days every year workshop and four hours every month for evaluation), prepare relevant tools (e.g., SWOT analysis), and get data and insights (e.g., Studies, MoreThanDigital Insights)
Strategic Planning should help you answer questions
As an entrepreneur, your goal is always to answer important questions about your business. Strategic planning is like a regular questionnaire about the future and a way to question the progress toward your goals. Some of the questions you should answer as part of the strategic planning process:
- What do you want to achieve? (e.g., vision and mission)
- Who are your competitors? (e.g., direct and indirect)
- What does the market look like? (e.g., growing competition,
- What are my opportunities? (e.g., globalization, new technology)
- What are the threats to my business? (e.g., globalization, resource prices, new market entrants)
- What are the strengths and weaknesses of my business at the moment? (e.g., low digitalization, no real-time data, strong customer relations, loyal partners)
Simple Steps to Create the Basis for Strategic Planning
Especially for SMEs, a fast and straightforward strategic planning process is very helpful. These are the key components of creating a strategic plan and the necessary analysis that will give you a solid foundation for decision-making.
1. Evaluate current resources and infrastructure
Before you begin strategic planning, SMEs should thoroughly evaluate their existing resources and infrastructure. Assess the available staff, technology, capital and time needed to implement a successful plan. Also consider outside experts or consultants who can provide additional support and guidance.
2. Set goals and objectives
Establish clear, achievable goals that define the desired outcome of the strategic planning process. For example, an SME may set a goal to increase sales by 10% or reduce costs by 20% within a specified timeframe. Actionable goals should always be SMART (Specific, Measurable, Achievable, Relevant, and Time-bound); therefore, KPIs should be used to link the goals to something measurable.
Tip: Try to set a maximum of 10-20 KPIs that are regularly updated and evaluated as part of the strategic planning process. If possible, create a dashboard to see your performance in real time.
3. Analyze the internal environment
Conduct a thorough analysis of the SME’s internal environment to identify strengths, weaknesses, and areas for improvement. Factors such as organizational structure, culture, operational procedures, and resource availability should be considered.
4. Analyze the external environment
Analyzing macro trends such as industry developments, economic conditions, technological advances, and consumer preferences can help determine the SME’s strategy. For example, a thorough assessment of market needs and competitor offerings can help inform plans for product or service development.
5. Develop a strategic plan
Using information gathered from the internal and external analysis, create a roadmap that includes actionable steps and milestones for implementation. Involve relevant stakeholders in the development of the plan; this way, everyone has an opportunity to provide input. Also, please prepare for and consider potential contingencies.
9 Steps for Implementing the Strategic Plan
Once the plan is finalized, it’s time to implement it. Here are some essential steps to help ensure a successful launch:
- Assign Ownership and Responsibility – Clearly define roles and responsibilities for each task in the strategic plan. Assign an owner or leader for every action item, who will be responsible for driving results and accountable for the implementation.
- Create an Implementation Plan – Develop a realistic timeline and budget for executing the strategic plan, including milestones, personnel assignments, and resources needed to ensure success.
- Communicate with Stakeholders – Ensure that all those involved in the process have been consulted and are kept informed of progress throughout the implementation phase. Think of creating a common space to share all communication with your stakeholders so everyone is “up-to-date”.
- Monitor Progress – Track progress against key performance indicators (KPIs) regularly to identify potential risks or areas for improvement early on in the process.
- Evaluate Performance – Analyze outcomes after completion of each stage to determine whether objectives have been achieved successfully and if any adjustments need to be made in the future.
- Train Employees – Provide adequate training materials so that employees understand how their roles fit into the overall strategy, allowing them to execute tasks required by the strategic plan effectively.
- Celebrate Successes – Make sure to recognize accomplishments along the way, as this will help motivate teams towards achieving objectives.
- Adapt as Necessary – Continuously monitor and respond to external developments that could impact the SME’s plans, adjusting strategies as needed.
- Review & Refine – Take time for regular reviews to identify areas of improvement and refine strategies accordingly to remain competitive and successful over the long term.
Measuring the Impact of Strategic Planning
KPIs (Key Performance Indicators) are essential for a successful strategic planning process, as they make progress visible and traceable. By regularly tracking and evaluating the most important KPIs, you can monitor progress towards short and long-term goals. It is important that the KPIs are easy to interpret and reflect the company’s goals, strategies and performance (e.g. customer satisfaction or market share).
In SMEs, it is important to select only the most relevant and practicable KPIs for each business case or strategic objective. Common indicators include customer loyalty, sales growth, market share, employee engagement, cost savings and environmental impact.
It is also important to set targets for each KPI in order to track progress and make adjustments where necessary. Setting targets makes it possible to identify gaps between expectations and actual performance.
3 Common Pitfalls and Challenges for SMEs
When it comes to strategic planning, most SMEs face at least one of the following 3 challenges:
- Limited resources – One of the most important issues is “resource constraints.” SMEs often have limited resources and tighter budgets than larger companies. This makes it difficult to implement effective strategies and think strategically. It’s important to be creative and make the most of available resources, so try to set clear goals in your strategy and work with the resources you have. Sometimes a shortage of resources can also help you become more efficient than your competitors.
- Lack of time – Strategic planning can take a certain amount of time that most entrepreneurs don’t have. Good strategic planning can be done in 1-2 weekends and if you get outside help, you may be able to refine your results in another day. So don’t overthink it, start small.
- Lack of experience – Many SME entrepreneurs come from different fields of expertise. As a result, they often lack the experience to develop effective strategies. That’s why it’s important to seek outside help or read articles like this one on how to get started. Try to stick to the basics and start small so you don’t get overwhelmed.
- Changing business needs – The business landscape is constantly changing, making it difficult for SMBs to keep up with the latest trends or emerging technologies. It’s important to stay flexible and adjust your plans accordingly. Use various online resources to at least keep up with the latest trends in your industry, and try to connect with experts in your industry 2-3 times a year to stay current.
Good strategic planning for SMEs requires a basic analysis and sometimes only 3-4 different tools such as a SWOT analysis, a strategic plan and an agenda with strategic action points that can be tracked with the appropriate KPIs.
Companies can increase the impact on their business by assigning responsibilities and accountabilities, creating a detailed implementation plan, communicating regularly with stakeholders, monitoring progress (e.g. through KPIs), training employees on existing strategies, celebrating successes along the way and adjusting as needed when external developments occur – SMEs have all the ingredients needed for successful strategic planning.
You can also use tools like MoreThanDigital Insights, a comprehensive platform that equips you with everything you need to strategically measure your success. It’s free, gives you all the KPIs and questionnaires you need to systematically track your progress, and provides valuable analytics to make sure you’re on the right track.
So don’t wait any longer and start harnessing the power of Strategic Planning for SMEs today!