Strategic Business Planning and Modelling Go Hand-In-Hand

As an SME executive, what are your thoughts on strategic business planning? I would be willing to bet you consider it critical to the success of your company. I would also challenge you to go one step further to consider business modelling. Effective planning for small business utilises business modelling alongside traditional strategic business planning to yield the best possible results.

What many business executives do not understand is that mathematical modelling can help companies better address supplier issues, regulatory changes, customer losses, and a full range of other issues by carrying out various scenarios that will help them better understand how to address such issues in the future. This is what business modelling is all about. Moreover, business modelling is driven by data and analytics.

Strategic business planning is a tool that companies use to plot their progress from one growth stage to the next. If business modelling can help management plot a better path – and it can – it makes no sense for them to ignore it.

The Structure of Business Modelling

Since business modelling is an analytical tool that is driven by data, it must be well structured if it is to accomplish the intended purpose. An effective business modelling tool addresses the origination, execution, and implementation of proven strategies in three key areas:

Ongoing business planning

Future company transactions

The financial consequences of those transactions.

Most business modelling scenarios involve all three areas in progression from the earliest stages of business planning to analysing the financial outcomes of such plans. Other scenarios may involve just one or two areas, depending on what the company is attempting to accomplish through modelling.

Benefits of Business Modelling

The benefits of business modelling should quickly become apparent upon implementation of a given scenario. From the very beginning, business modelling benefits management teams by forcing them to step back and take an honest look at their own strategic business planning in order to create a testing scenario. This first step alone is an immense help.

Another benefit of business modelling is that it forces management teams to logically think through the many and various decisions they could make in regard to any given scenario. In more than 30 years of strategic business planning, I have worked with my share of executives who could have learned to think through their decisions a bit better.

Limiting financial exposure is yet another benefit of business modelling. The whole point of creating scenarios is to work through the possible outcomes of a given situation in order to limit exposure as much as possible. The maths portion of business modelling is most clearly demonstrated in this particular area.

Effective planning for small business requires more than sitting around the boardroom and plotting a path for moving forward. It involves analysing multiple paths through business modelling scenarios that can provide real, tangible, data-driven results that will encourage the best possible decisions while also limiting exposure.

By Peter Smith.

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