Clear strategy means plain sailing
21 October 2019
When times are tough, it is imperative that your business remains on course and that it adheres to its strategic objectives.
Antonie van der Hoek Partner at BDO Business Services’ Cape Town office, says that a business needs to have an overall strategy that explains how it is planning to meet its vision, mission and goals. It also needs a financial strategy to support its overall strategy.
The strategy is continually measured by targets and would normally be in the form of a three to five year rolling forecast of the following:
- Income statements
- Balance sheets
- Capital expenditure budget
- Revenue volumes
- HR budget, people count
- Marketing and business development/sales budget and activities
- IT infrastructure rollout and spend
“These budgets would be maintained for the current financial year and would feed into the long-term forecast,” says van der Hoek. “The plan is not static - every month the rolling forecast is adjusted for actual performance to date. In addition, the future rolling forecast needs to be updated for known changes. This way the CEO of the company can see how the runout of the business plan is impacted by the changes in actual performance as well as changes in other factors such as interest rates, petrol prices, exchange rates and other economic influences.”
Van der Hoek advises that the idea is that if the CEO can see how the change in certain factors is likely to impact on the future, appropriate business decisions can be made.
“A business strategy can be likened to the job of a skipper of a boat, whose goal is to get his vessel safely into harbour. However, wind and other weather conditions, as well as currents could steer the boat off course. A skipper has to constantly adjust the sails and rudder to ensure that the boat keeps its course, and the skipper’s ultimate goal of safely docking in the right harbour,” concludes van der Hoek.
Read more BDO Insights