Strategic business plans

Roadmaps to the future

By William Atkinson

If you don’t know where you’re going, any road will take you there. This philosophy may be ideal for adventurers who are looking for thrills or for people with a wanderlust who are out to “discover themselves.” However, it is disastrous for business owners. If you don’t create a plan for where you want to take your business, you will find that your business takes you where it wants to go, where the economy wants it to go or, worse, where your competitors want it to go. Every successful business needs a strategic business plan, one that looks at least three years into the future and that is reviewed and updated at least annually.

“My partner, Jeff Malcolm, and I have been involved in developing strategic plans for about 10 years,” says John Lendrum, president of Norwalk Concrete Products in Norwalk, Ohio. “We realized that if we wanted to get where we needed to be, we needed to develop plans to do so.” In sum, according to Lendrum, you need a roadmap for where you are going and what you want to achieve.

Vernon Wehrung, president and CEO of Modern Concrete Septic Tank in Ottsville, Pa., agrees. “We look at strategic plans as a tool to help us reach our business goals and achieve our potential, rather than allowing our future to be determined by a random act of chance,” says Wehrung, who serves as chairman of NPCA. “I like the idea that the plans allow you to be proactive, rather than reactive. A strategic plan is not meant to be a survival kit when you’re already in trouble.”

While business plans can do all of the above, they can also do something else: increase sales and profitability. Just six months into its strategic plan, Gainey’s Concrete Products, Holden, La., had already improved its position in target markets, doubled its profits and doubled its cashflow. Here’s a glimpse into each of the three companies’ strategic plans:

Norwalk Concrete Products
As part of its strategic business planning process, Norwalk Concrete has developed a corporate vision statement, a mission statement and annual goals that are definable and objective.

“We sit down each year and decide where we want to go,” explains Lendrum. “At the end of each busy season, we survey our staff to find out what we did well and not so well. We then ask them what they think we should change and what things need to be improved. We also look at where we may be spending money that we shouldn’t be spending.”

The management team then uses this information to help set goals for the following year. One example might be to increase sales 4 percent in a certain product category. Another may be to create a formal preventive maintenance program for vehicles and plant equipment. Besides product lines, management looks at customer service, where it wants to spend money in plant and equipment, how it will improve its financial performance and how it will take care of its employees.

“The plans help us to become disciplined in a number of ways,” explains Lendrum. “One relates to the market segment and products we want to focus on.” For example, once you set this goal, you must ensure your purchasing program falls in line with the goal.

Another benefit the company has found to creating plans is that it helps to uncover and identify weaknesses. For example, according to Lendrum, if you set a goal and find that you are unable to reach it, this tells you that either you forecast incorrectly from the start or something in your organization is preventing you from achieving that objective. If it’s the latter, take steps to find out what’s holding you back. “You may find some things that are very uncomplimentary about your business if these same problems continue to arise time after time,” he points out.

Another benefit of the planning process is that it helps you determine how best to spend your time. “If you are planning to carve out a block of time to do something, you first need to review your plans for the year to see if what you’re going to spend time on is something that will really help you reach your goals,” he explains. If not, then ask yourself if you really want to bother spending time on it.

Modern Concrete Septic Tank
Strategic plans help management in this company look at its business in a completely different way, according to Wehrung.
“We do three-year plans,” he says. “We bring in an outside consultant who has had experience with this.” Management has found value in using a consultant, because this person has a fresh perspective and isn’t stuck in the company’s parameters, habits and ways of thinking.

The management team and the consultant go away on a retreat each year to develop the plan. The first step is to conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats). Next, the team creates a set of strategic assumptions. (Examples: Labor will become more difficult to come by. Government regs will increase.) “Then we identify key issues facing the business,” says Wehrung. This involves asking questions like: Why are we in business? Do we want to grow? If so, how big do we want to get? Based on the answers to these questions, the team comes up with two to four long-range strategies, which it then breaks down into short-term goals and objectives. “Then we set up critical measures of success, which can be daily, weekly or monthly.”
A year later, the company brings the consultant back and goes through the same process again.

“One benefit is that we see ourselves somewhat differently than we did in the past,” says Wehrung. For example, the company has gotten away from commodity products and worked to develop ones that are more proprietary. For 57 years, it had been tied closely to the septic tank market and the stormwater/sanitary market. Now it is expanding into areas that are less reliant on the construction market. One of these new products is a precast concrete bathroom, and another is railroad crossing sections.

Another benefit of the planning process is that the results help management become better leaders in the eyes of the employees.

One challenge Wehrung finds after creating the plan each year is making sure each individual understands the new responsibilities and accountability that will be added above and beyond each person’s regular job. One way he has found to address this is to schedule monthly meetings to assess progress. This encourages everyone to do what needs to be done so they will be prepared for the meeting. The meetingshelp keep the strategic business plan a living, active document.

How do you find a good strategic business planning consultant? Wehrung recommends contacting your local Manufacturers Resource Center. “Most community colleges and local universities will have one of these,” he says. “In addition, most MRCs have grant money available. In fact, we get a significant portion of our strategic planning process paid for by these grants.”

Gainey’s Concrete Products
Prior to joining Gainey’s as vice president, Greg Roache was the precast business manager for Master Builders, a multinational conglomerate. “Strategic planning and marketing planning were fundamental for me,” he says. After that, he consulted for a while. Gainey’s was a client, and he eventually started working for them full-time in early 2003.

“We have done a complete analysis of our business,” he says. The first step was to segment it by business group. At the time, management looked at the business as a single entity and was involved in cost-based pricing. Now the company has three segments: residential wastewater systems, commercial wastewater systems and stormwater systems. It now does isolated profit and loss statements by business segment.

Once management created individual profit and loss statements on each business segment and conducted market attractiveness assessments, it found that things had changed in some segments over the years that were affecting profitability and market opportunities. For example, five years ago the company’s residential wastewater business was its most profitable. Now it is considering divesting itself of that business because of competition and manufacturing costs.

By contrast, the company’s commercial wastewater business was quite the opposite. Now the profit potential is high enough in this market and the company has moved resources, both in terms of key people and money, to focus on it.

The company has done further analysis of its business operations. For example, it looked at how much value it was providing compared to how much value the installers were providing, and then decided what the margin split should be.

“When we did the analysis, we found things were out of whack,” he reports. “The installers, for a very low investment and low levels of expertise, were getting the lion’s share of the margin split,” he states. “Gainey’s, with a tremendous investment in a number of areas, was getting a minor split.”

Management has also completely restructured the company from the inside out. Some people were in positions where they would not be able to advance. Now they can. Businesses have merged, reporting structures have changed and job descriptions have changed. The entire group is on a monthly bonus incentive, they make daily decisions on whether to hire, which areas of the plant need more or less resources, and so on. “They self-manage,” explains Roache.

“We have empowered more people to do things that I once did myself,” adds Lisa Gainey-Roache, president. “This gives me time to focus more attention on the strategic initiatives. I no longer work 70 to 80 hours a week.”

Although it has made significant changes, Gainey’s is still moving forward. “We are currently working on a vision statement,” says Roache. “We know what we want it to say. We’re just working on condensing it.” In early 2003, the company defined itself as a precast concrete manufacturer. Now it defines itself as “designers, manufacturers, installers and maintainers of water systems.”

“We are no longer concerned about whether we manufacture concrete components to go with the systems,” explains Roache. “This means we are no longer constrained to being in a market where our competition makes a box out of concrete and where we are competing on price.” Instead of saying that it costs the company so much to build that box, management is now saying that it has the intellectual know-how to design, manufacture, install and maintain these systems. “This is how we now go to market,” he says.

Using a strategic business plan is just like using a roadmap to plan your travels. Going without one is fine for adventurers and thrill seekers. But with one, you may very well be planning your company’s future.