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Is Your Strategic Plan Missing a Vital Piece?

December 5, 2018

A strategic plan is created to articulate a vision and unite an organization in realizing its exciting future.  Strategic plans are designed to better the business, so there is typically an underlying belief that the plan will result in financial viability, but while strategic plans commonly look 5 years into the future, 5-year financial plans are far less common.

Why a 1-year financial plan and a 5-year strategic plan?

It is critical to have a view of the long-term financial implications of the strategic plan – a strategic financial plan.  By its very definition, a strategic plan will have effects farther into the future than the next 1-2 years.  Some shy away from putting numbers to something so long term because it’s difficult to accurately budget for 1 year, let alone 5.  But that’s just the point; it’s not intended to be a budget.

Not a budget – keep it simple

A strategic financial plan should provide a big picture view of existing trends with and without the effects of the strategy layered on.  This does not have to be difficult or incredibly detailed.  Stick to the big trends and impacts and keep it simple.  The purpose is to highlight the financial changes that are brought about by the strategy rather than to predict financial results.  In other words, focus on the resulting differences.

Include all of the strategic initiatives to see the combined effect.  If the plan doesn’t meet expectations, it’s better to know that now.  And if success is highly reliant on specific assumptions, such as increasing loan growth, you can work to get the organization united behind loan growth early on.

Deeper discussions beyond the finance team

The conversations that surround quantifying the financial impacts and timing are productive extensions of the discussions that led to the strategy in the first place.  Rather than asking the finance team to get input from individual stakeholders and put it into the plan, have the conversations as a strategic team.  The exercise of thinking through the impacts together will uncover hidden expectations and help everyone land on the same page.

Linking strategy with measures of success

Great strategy needs to be linked to financial outcomes, which is intuitive for most.  At the same time, the idea of quantifying financial impacts over the long term represents a mindset shift for many.  The strategic financial plan can be created at a high level while generating a much needed long-term view, which makes it an especially beneficial piece of a comprehensive strategic picture.

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