(This post was originally published over a year ago, but the topic of the tangible worth of a strategic plan has come up a few times in conversation in the past few weeks, so I thought I’d republish it today for another look.)
Across sectors and services, there’s a huge drive to prove value – often expressed in terms of return on investment, or ROI. To figure out ROI, you need to think about the benefits something yields in relation to the costs.
When there isn’t a direct line of sight to a financial return, though, it can be very difficult to trace quantifiable benefits. Strategic planning may not directly generate revenue or control costs (and of course it does cost money), but that doesn’t mean you can’t think about it in terms of ROI regardless.
Let’s start with the benefits. A clear strategy, with a well-executed plan will help you…
- …focus your staff (and volunteer time, where relevant) on critical activities that really advance your mission – and avoid dead-ends and time-wasters.
- …target marketing and communication dollars on segments and audiences who can really help you grow.
- …avoid expenditures that don’t really support the strategy.
- …protect your revenues against threats coming from the external environment.
- …take advantage of growth opportunities.
So, what’s that worth? What kind of boost does that give you in financial terms?
Let’s imagine an annual operating budget of $3 million. Most strategic plans have a planning horizon of 5 years, depending on industry, but to be conservative let’s say your plan only will last 3 years, for a total of $9 million worth of budget to be managed over the life of the plan.
At that size, if you think that a strong, strategic plan can actually give you a 5% boost – either in spending smarter, earning more revenue, or reducing/avoiding costs, or some combination of these – that’s worth almost half a million dollars to you over the life of the plan.
If you think the boost could be more like 10%, then that plan is worth $900,000.
Of course, if your budget is more like $10 million, then a 5% benefit starts to look more like $1.5 million over 3 years. And if your budget is larger, even a very small percentage benefit will be highly valuable.
Remember, these are all incremental benefits – over and above whatever else might be happening. Whether you get it from greater revenue or avoided costs, this turns into money you can now spend on other things – more programming, innovation, expansion…
Your planning budget – even including robust research – would have to be enormous for the ROI to be anything other than sky-high.
Now, on paper, the plan isn’t worth anything. But, if you implement it with some discipline, a good plan will help you avoid costs, make smart investments, and bolster revenues, because it will drive both your strategic and operational decisions. What is that really worth to you?
If you are interested in starting a conversation about strategic planning – with an initial consultation that doesn’t come with any charge or obligation – please get in touch.
Photo from Death to Stock Photos, used with permission.