Strategy: The foundation of growth
Paul Fileman looks at planning and strategy as part of building a recurring revenue model
In the last article, the focus was on balancing the eight factors in building a recurring revenue IT support business model. In this second article in the series, we will focus on the first factor – planning and strategy.
Planning and Strategy
Strategic planning is deciding what you want, your purpose. Business planning is deciding how you get there – the map and the route. Implementation processes get you there. An effective business plan can only be developed from your strategic plan.
Mission, Vision and Goals
What is your retirement plan? Are you thinking of selling the business to fund retirement? Are you looking for a clean exit with your existing management team buying the business from you? In both cases, there are things to think through. Any buyer will look for an established and motivated second tier management with the right mix of skills and experience, a track record of working together and an ability to operate without the owner. Your existing team will, most likely, need to raise funding – which will require them to demonstrate that they know what they are doing.
Business goals help you to make sure that your plan is taking you to the right place. You need a vision for the business – otherwise you have no way of knowing if you are going in the right direction. And you need a mission so that your team, your prospects and your customers (and your investors) know what you do, for whom, and how you do it. A mission helps with alignment – helping people decide for themselves how they operate on the details. In a service business it is so important that the right things happen at the right time, for the right reasons, without your personal involvement in every tiny detail.
Where is the Value?
You have an exit strategy. You might not be working towards an exit, but you should confront the prospect of your business either ending or continuing without you at some point in the future. To carry on without you, the business needs other people to want to be involved – either your successors or a third party who buys your shares.
So, where is the value in your business? If all your retained customers are signed up to recurring revenue based contracts, you have one foundation of your business value in place.
Where is your Focus?
Are you constantly in “999” mode, dashing from crisis to problem to crisis? If so, regardless of the immediate numbers, your business could be in danger.
There are three key reasons why businesses fail:
1) Lack of direction
2) Inability to deliver
3) Lack of funds
The most successful businesses have a clear strategy and vision. The owners know when and how they will exit their business – with succession planning and people development working in harmony with the annual operating plan so that training, recruitment and people development are all aligned with the plan. On the organisational front, successful businesses are organised around systems, not people so that the business systems and processes always work, regardless of who is on holiday or off sick. They know their market position or niche and have an efficient ‘sales machine’ that exploits their past successes and their market knowledge gained from that specialism. Their finances are carefully planned. And the owners of the business are working on the business, not in it: ‘managing’ rather than ‘doing’.
Effective Strategic Planning
If you can be good at defining, getting people to buy into and implementing a high quality strategic plan, you will:
- Give the business direction
- Provide a focus for activity within the business
- Stay in control
- Build an effective platform for profitable growth
With profitable growth, you get to choose the kind of business you are running. For some, a lifestyle business may be the ideal for themselves and the wider business team. For others, building a value business is both the dream and the vision. In a value business, medium and long term recurring revenue contracts are signed, delivered against and measured. And there is a portfolio of Intellectual Property (scripts, trade marks, products etc) fully documented with a skilled workforce that is not over-dependent on the owners. In a value business, the value does not exit when you do.
With a competent strategic plan, you can shift your focus. This change in focus enables you to work on medium and long term projects that stop things going wrong in the first place, reducing the amount of time you have to spend on emergencies. You can start to develop improvements in business processes that will boost your delivery capability. The wider team can be directed to focus on relationship building and on recognising new opportunities. You can spend some of your own time on refining the plan – and you could take time out for recreation – to boost your own performance.
Paul Fileman is director accountable for momentum at Transmentum Limited
Article 1: Controlling the wheel of fortune
Article 3: A sales strategy for accelerating growth
Article 4: Marketing and Your Proposition
Article 5: Help Desk - a profit centre or a cost?
Article 6: Six factors in customer retention
Article 7: Vendors: Suppliers or partners?
Article 8: Building a product and services strategy
Article 9: IP and your managed service
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