So far I have described the techniques and methods of organizing a new company and defining how to establish its products in the marketplace. We have seen numerous procedures for organization, developing products by finding financing, managing operations and its project subsets, and philosophies to use these tools. This is all fine and very necessary. But why do it? Why bother? Because the entrepreneur has a strong desire to build a successful business and make money. Is this sufficient, and is using the tools effectively all we have to do to succeed? Probably not—besides an idea, albeit a well-developed one with significant financial and product analysis, we need to have a sustaining vision. Do we have an inkling of an idea of where we should be 1, 2, 3 years from now in terms of bottom-line profits? Possibly yes but probably not. We may have a goal in mind and even some financial numbers, but nothing firm or even focused.
This is where strategic planning enters the picture. A business needs a plan in a strategic sense. Otherwise, any road traveled is as good as another and only happenstance will get us to a desirable location. We want to employ all the very important tools, procedures, and philosophies we've learned, but we want to do it in a cohesive, coordinated way so that the road we choose is the correct one for our competitive situation. We need to create a business plan to grow and sustain the new business.
Strategic planning gives us focus. It transfers an idea into pragmatic reality as played against the business environment within which we need to compete. The strategic planning process will produce a business plan for the company, whether it be a new venture or an established firm. It is equally valid for product-producing or service companies. This document will set the stage for all functional planning; it should be the basis for the next 2 year's operating budgets and provide direction and guidance as far out as 5 years for all aspects of the business. Simply stated, a business plan ties all the pieces together. We will now see how a business plan is developed and how it uses many of the techniques previously discussed in this book.