People often confuse strategic planning with business planning. They also are unsure of where marketing strategy, sales strategy, sales forecasting, and branding fit in the mix. This podcast tells you how these elements fit together, and in what order (written transcript below).
I have another podcast for you today. It's taken from a speech I recently did to a large group of small business owners, and the speeches purpose is to teach what a strategic process is from beginning to end. It's an overview of strategy and business planning. What I've discovered is that a lot of people know the words strategy, marketing plan, business plan, but they often confuse those words with one another or perceive more overlap than there is and consequently don't understand what the individual pieces are and how they fit together to serve as a comprehensive approach to business.
So in 16, OK, maybe 17 minutes, this podcast walks you through strategic planning, through business planning and marketing planning and lets you picture the whole thing. Now I will apologize in advance. The sound has some weird sound artifacts in it. It was very echoey in the original recording. We pulled some of it out, but we couldn't really make it clean. Here is the presentation and I hope it gives you some important clarifications.
In my experience, people are very confused about business strategy. Just recently, I encountered a new client who had spent a ton of money with another organization creating what she thought was a business strategy, what they told her was a business strategy. But really what it was, was a sort of convoluted and not very productive competitive analysis. Competitive analysis is not strategy. In other cases, people confuse business strategy with business planning. Business planning is very important, but it's the next step.
After creating a strategy and without a good strategy, it's almost impossible to create a decent business plan. Sometimes people think that business strategy is just for large corporations and large corporations certainly need a solid strategy to run their business and to keep all of the various parts off and far flung from one another in alignment. A small business needs a business strategy even more. Why? Because a small business has far fewer resources to work with. So they have to make sure that every single resource is producing more than twice its own value because they're competing with these big businesses that have a lot more resources than they do.
So what is a business strategy anyway? Business strategy is a way of establishing your competitive advantage and your differentiation. And once you have those pieces firmly in place, then you can expand those pieces out into a good business plan, a good marketing strategy, a good sales strategy, and then that turns into an operating plan, et cetera. And I'll actually talk you through some of those connections toward the end of this conversation to start with a business strategy.
You start asking the question, why am I in business? Why did I decide to do this business? What is it I'm selling? What is it I believe in? What is it I want to get out of it. If you don't understand those pieces really well, then you can end up in a situation lots of business owners find themselves in at some point down the road where you're not having fun anymore or where the business isn't delivering what you once thought it would.
If you're not careful to lay a roadmap and have a clear vision of where you're going, you could end up driving just about anywhere with your business. So the starting point is to establish why you want to be in business. What do you want to get out of it? What is your long term goal for the business? Those things may change over time, but they tend to not change regularly.
So you start with a clear starting point. You start with a clear view of what your finish point looks like and you start driving down that road. And if those things do evolve or change over time, then you evolve and change your strategic plan. But it's a very intentional process, not an accidental meandering. Meant to end up in Florida, somehow ended up in Maryland sort of issue. So that's your starting point for a business strategy. Once you figure out what you want out of the business and what your long term goals are for the business.
You identify what things are about that vision for you that can matter to other people. So if your goal if your goal is just to make money, which, by the way, is rarely just the goal, if your goal is just to make money, then the thing that's going to matter to your customers is providing value.
And it may be just as simple as that. You want to make money, so you're going to provide a lot of value to your customers so you can make money. If your goal is something different, though, making a difference in some way, affecting the world in some way or providing something that nobody else provides or providing in a way that nobody else provides it, that is going to appeal to some customers as well. And remember, you don't need all the customers.
You just need the right customers. Nobody, not even Wal-Mart has all the customers. So by identifying how your vision and vision for your business relate to certain types of customers and how they will find that vision resonates with them. That's your next step to really contemplate how you connect your view with the needs of others. And that's the starting point of customer attachment or customer relevance. The next thing you do in a strategic plan is you think about all the things you're going to offer.
It's not just your products. You're offering products, you're offering price points, you're offering certain values. For instance, you may be offering eco friendly products, which is a huge value these days or something that's healthy. Or you may be offering something that's cutting edge in terms of style, or you may be offering something that represents a culture or a group of cultures. All of these things matter to certain groups of people.
What you offer also has to do with how you sell to people. Where are you available? Some people love to go shopping in boutiques. Other people don't want to walk into them and they only want to shop online. Some people don't really want to have a shopping experience. They want to have an experience that ends up delivering some kind of a product to them. So how you sell and where you sell are part of your competitive offering, how you take care of your customers before, during and after the sale and the ways in which you make yourself available are also part of that offer.
Some people only want to deal with you face to face. Other people are very comfortable with using technology and reaching across distances. So you're competitive. Analysis begins with identifying all of the attributes about your business that you envision offering and how those attributes will matter to a specific group of people. There is a product for everybody and there is somebody for your product. So if you think about your product, not just in terms of the product itself, but in terms of all the things that you wrap around selling service, meaning availability, price.
That is the group of attributes that becomes your competitive offering. Once you understand what your competitive offering is, then you do it even deeper work of saying, OK, now I've had an idea of who this customer is, but now I'm going to get real specific. Who is this group of people that are really going to care that I offer one, two, three, four and five in this way? And you do some search, that's your competitive research, it's not so much about comparing yourself to competitors.
In fact, it's very little about comparing yourself to competitors. It's very much about figuring out how you matter to customers, because when you're selling to customers, you're not really selling against whoever you perceive to be your direct competitors. You're selling against that customer's perceptions of what else they'd rather do with their money. And that's a much, much bigger world than just selling against a particular competitor in your market. So how do you get a customer to decide to part with their money by mattering to them and what matters to customers is that whole list of attributes that we just talked about.
So that is the bulk of your competitive analysis now in the strategic planning process. There is a point where you do pay attention to the prices. Other things are sold out because you want to understand what's out there in the world and what feels relative to customers, what things look like from the customer's perspective. So you do do a survey of what's out there and what the customers perceive as available. But for the most part, your competitive analysis is about being competitive from the customer's viewpoint for their dollars, given all the other things they could choose to do with them.
Once you've completed that part of the strategic planning. Then it's time to start putting those pieces together into this compelling argument that talks about who you are, what you make or what you offer that makes you different and why that matters. And you explore through the strategic planning process how you're going to make those statements not only in the products that you make, but in the materials that you use to make them, or if you buy and sell products in the vendors that you buy from.
What are those relationships about? What are the things you expect from them? You look at how you're going to apply, who you are, what you make or what you do and what makes you different and why that matters. You're going to apply that to. The actual product specifications, the way you sell, the way you reach out and find customers and you create this really compelling, it's not so much a story, it's more like a guidebook for how you're going to run your business to be consistent at every single point with this set of attributes that matters to a particular set of customers.
From there, in your strategic planning, you identify how you're going to find more of those customers, what that customer strategy looks like, what your product strategy looks like, and then you tie it all back together with some measurements that say these are the things that we have to accomplish. And if we accomplish that, if we achieve these measurements, then we will know we're being successful in our strategy. That's what a strategic process is all about. And when you do it well, you literally end up with a handbook for running your business.
And that handbook will inform not only you, but anyone else that you bring in to work with you or any contractors that you work with. It's a really compelling tool for keeping you focused on what's important and for learning to set aside the things that are interesting but are not particularly relevant to what you've decided to accomplish because you don't have unlimited resources if you had unlimited resources and you could just hire new people all the time and go after all these ideas that you have, but you don't have unlimited resources.
So you have to get really focused on doing your strategy really well. And that's how you make money. So now you've got this strategy book and it says who you are, what you make or what you do that makes you different and why that matters and identifies which customers you're going to be going after. And it also identifies which types of products you will and will not make and which types of services you will offer and the way you're going to sell to people and the brand presence.
It's the beginning of your brand presence in the market. That's your strategic plan. So now what do you do with it? Well, now you make a business plan and that business plan starts with a sales forecast. It says, OK, based on this strategy, what do we think we can sell in year one, year two in years three through five? Now, your one should be a pretty good estimate of what's possible. Year two, three, five and up a little fuzzier, but again, the kind of a road map for you that keep you focused on the future so you don't get too far off track.
Once you create that sales plan, you can create a business plan. And the business plan says, OK, now what kinds of costs am I going to incur in my business to pull off this strategy? And while you're making your business plan, you're going to say, oh, wait a minute, I have to decide how much I'm spending on marketing dollars. And at that point, you can decide I'm either going to set a hard budget for my marketing dollars and learn how to work within it, or I better stop for a minute and make my marketing strategy and then I'll come back and finish the business plan with good marketing dollars place.
I kind of like that approach because when you do a marketing strategy, it helps you rethink your sales forecast, it helps you identify both opportunities and risks that you weren't thinking about before. So you step aside and you make a marketing strategy and your marketing strategy. You say, what kinds of things must I do to achieve the sales numbers that are in my sales forecast in order to achieve my strategic vision? And how will I bring across from my strategy who we are, what we do or what we make that makes us different and why we matter, how are we going to get that message across if every single marketing thing we do, whether it's social media or television advertising or signage or a brochure.
So you make your marketing strategy and you tested and say, do I really think this is the right marketing plan and strategy to achieve the sales forecast that I need to achieve my strategy? And at that point, you can go back to your business plan and say, OK, my marketing strategy has me spending this many dollars each month in the first year and this many dollars total in the second, third or fourth year. And now you have a business plan with solid numbers informed by a sales plan and a marketing plan because the sales plan tells you how much revenue you're going to have to pay for things in the business plan.
And the marketing plan tells you how much money you're going to spend to get those sales because nobody gets sales without spending some money. And also in your business plan is your human resources plan. And your human resources plan identifies when you're going to need to hire people and how much you're probably going to need to spend to get them. That's your business plan. And the one thing we haven't talked about is your brand and your brand really is the element that should be developed right after you're finished with the strategy, because the brand is.
Sort of the outward communication of the strategy, it's the pieces of your strategy that you pull forward to communicate to the world, to help them recognize who you are, what you make or what you do that makes you different and why you matter.
And the brand has to be that close to the strategy because a brand has to be very authentic to matter to your audience. So the brand should never be done without a strategy and it should always be the first thing you do after you finish your strategy and then picture this when you do your marketing plan, you already have you already have your brand established. You know how you're going to deploy that brand across every part of your business, because the brand isn't just about your marketing materials.
The brand is about how you talk to customers and the service policies that you offer your customers and what your packages look like when they go out the door and what your post sales service is like. So your brand flows out of strategy. In fact, everything flows out of the strategy. You start with your strategy, then you make your brand book and from there you are able to make a business plan and a marketing plan.
And now you have all of the guidelines you need to run your business intelligently with good cash planning and with an eye constantly on the future so that you make sure that your day to day decisions don't knock you off course and send you off to the wrong place.
So that's what the strategy is, it's the process of identifying who you are, what you do or what you make that makes you different and why you matter and helping you attach those ideas to a set of customers and a set of products and services that will be compelling to those customers. And then that strategy is used to create the other elements of your business.
And if you're not doing all of those pieces, you're probably spending more money than you need to be running your business while at the same time selling less of what you need to fund your business.
And of course, that's the last thing anyone wants to be spending more on their business while selling less. So there you have it, an overview of the strategic process as it relates to the other business planning processes. And if you don't have all of those pieces in place or if you have even none of those pieces in place yet, don't worry about it. Just get started. You can run your business while improving your planning and trim the sail along the way.
You might as well, because the time's going to go by anyway. Right. And at the end of that time, wouldn't you rather have made tremendous progress toward great business planning and a refinement of your business operations? So this has been the works blog as a podcast for today, thank you very much for joining me. I'm Andrea Hill.