Financial and Strategic Planning: Which is More Important?
Successful businesses and enterprises don’t happen overnight or by accident. Instead, all companies that you see achieving success have done so with hard work, deliberate action, and, most of all, having those efforts guided by key planning.
To the uninitiated, strategic planning and financial planning may appear to be the same. Indeed, even those who have some understanding of these concepts may conflate the two or, worse, consider undergoing one type of planning while shunning the other. However, successful strategic planning requires requisite financial planning as well, and financial planning that isn’t accompanied by strategic planning will be misguided and incomplete. These two ideas inherently go hand-in-hand.
So, what are financial planning and strategic planning, and how do they best work together?
Defining Strategic Planning
Strategic planning for a company is the critical undertaking of defining who and what you want your organization to be. A proper strategic plan will outline your mission statement, your individual goals, and the timeline for accomplishing all the milestones. In that way, you can think of your strategic planning as creating a roadmap to success. It would be best if you defined what success looks like and why. A strategic plan will keep you honest, keep you thinking about your ultimate goals during the day-to-day grind, and outline how you make decisions.
Defining Financial Planning
Strategic outlooks require an understanding of finances, but strategic planning is a bigger picture than plotting and modeling out the exact dollars and cents. That’s where financial planning comes in. Financial planning is the process your company should undergo to allocate and plan for its money and any other naturally finite resources like people, time, and assets. If strategic planning is the roadmap, financial planning is the budget for the road trip you take with this map. It would help if you mapped out how much profit you make based on the given products or services your business sells. Those financial figures may change as you evolve and grow, so be sure to plan out what upgrades you can afford to make, such as hiring more people, opening a new facility, and anything else.
Which is more Important: Strategic Planning or Financial Planning?
This question is difficult to answer, and truthfully there isn’t one that’s more important than the other. Strategic planning in the absence of financial planning will likely fall short because you may run yourself out of business when costs exceed revenue or when unexpected events leave you unprepared. Financial planning without being anchored in strategic planning will only help you track where you are today but won’t facilitate growing or expanding in the future.
So, for businesses that are serious about their future, about growing and staying resilient, financial planning and strategic planning are exercises that must be undertaken regularly. If you don’t know where to start with this type of planning, Tobin & Collins can help. Our business consultants are ready and able to assist you in achieving your goals. Contact us to get started today.