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5 Steps to Creating a 3-5 Year Business Plan

The pandemic has highlighted the importance of having a strategic business plan that you can turn to when the unexpected happens.

How do you get started? We will give you the best practices for 3-5 year strategic planning amid true volatility.

The 5 Elements of a Strategic Planning Session

A 3-5 year business plan should be created, and then revisited, reviewed, and re-worked each year. By the time you’ve reached 2024, for example, you will have reimagined it three times before your business begins living it.

This continued reshaping is crucial to developing your business’s flexibility. Start with the fundamentals below and let your company’s size and complexity, sector – and even current events – inform how you implement each of the five elements.

1. Research

Leaders do not typically consider their planning preparation as research, but that is exactly what happens when they gather intelligence to inform their session. The best practice is to delegate the research so that each department comes up with a unique analysis from the perspective of their business needs.

Strategic planning research can include:

  • Surveys of stakeholders
  • A review of previous years’ strategic planning
  • Simple SWOT analyses:
    • Strengths
    • Weaknesses
    • Opportunities
    • Threats
  • Comparisons of planned-vs-actual outcomes across all initiatives
  • Market analysis
  • A study of your own brand perception
  • Current consumer behavior
  • Global economic and industry-specific headlines
  • An appraisal of the most common commercial- and enterprise-level goal-setting frameworks
    • SMART goals (Specific, Measurable, Achievable, Reasonable and Time Bound)
    • OKR (Objectives and Key Results) and BSC (Balanced Scorecard)
    • KPIs (Key Performance Indicators)
    • Benchmarking
    • BHAG (Big, Hairy, Audacious Goals)
    • MbO (Management by Objective)

Imagine a meeting where you hope to establish 3-5 year plans – and you had to do it without any of the above. It would be like navigating a new city without a map (or smartphone!) and expecting dozens, hundreds – or potentially thousands – of employees to follow you.

2. Review

Gather your group together and look back over the past year. Assess your last plan against these measures:

  • Was it effective in setting a course and keeping teams aligned around a shared goal?
  • How well did our last year’s plan uphold your company’s mission and values statement?
  • What assumptions were made that should be avoided this year? What assumptions held up?
  • Did the plan satisfy (or even lead) industry standards and modern practices?
  • Were team members able to implement the plan into your company’s operational framework?
  • How can you learn – not about how to do things differently, but about how to plan differently – based on last year’s plan?

Resist the temptation to skip the review portion of 3-5 year business planning. This is what experts at Harvard Business Review call strategizing your strategy. It separates brainstorming and spitballing from legitimately productive business planning.

3. Reach

The next step is applying your team’s research and review to your business roadmap. This is the exercise everyone envisions: all departments work together to set achievable plans for the coming 3-5 years of business operations. Encourage creativity while using the goal-setting framework from your review phase to inform, select, and shape your objectives.

Consider the adoption of rolling goals. “If your sales compensation is based on hitting your numbers for December 31, [then] your behavior will be very different than if you’re ignoring that deadline,” says Financial Planning & Analysis consultant Brian Kalish for CFODive. “The business is going to exist on January 1, so what happens is, you start making economically suboptimal decisions to hit artificial targets.”

Goals should be based on business objectives, not arbitrary endpoints. Specify potential trigger events (both internal and external) that will allow for alternative plans. Describe and agree upon scenarios in which new plans are implemented, as well as how your team will realign to the original goal once the disruption subsides. This flexibility provides peace of mind and confidence, should some unforeseen development occur.

Specific goals may include:

  • P&L improvements
  • A renewed focus on HR and talent optimization and management
  • Creative cost reductions
  • Prioritization of CSAT scoring health and progress
  • Smarter, more sustainable cash flow management
  • Strategic capital investing moves (or holds)
  • Improved or altered merger and acquisition activity
  • More actionable research and development deliverables
  • Maximized production capacity
  • Renewed and reimagined marketing and sales expectations

What does this look like in a real-world example? At Bain & Company, a tech infrastructure team applied this thinking to the tumultuous uncertainty of 2020: they gathered all the data, intelligence, and personal observations they could to decide what enduring trends were accelerated by the pandemic, and which would dissipate once the global health event was over.

As a result of this session, the company’s executive committee pivoted quickly to serve enterprises and enabled their product team to create and deploy new offerings for remote workers.

4. Refine

If your team tries to achieve all their ideas, they’ll accomplish none. Narrow down your group’s aspirations to only attainable goals – and agree together which few are worthy of sacrificing the others.

Once everyone is aligned, work backward to create short-term company-wide, departmental, and individual goals that map toward your long-term goals. Document everything.

Place special emphasis on the publishing of your final 3-5 year business planning and execution declaration. With a public roadmap, everyone in the organization knows the plan, and everyone can be held accountable.

5. Realize

Execution makes your business plans a reality. While the details of your implementation will depend on your goals and industry, there are a few overarching lessons:

  • Communicate the plan early and often. The Harvard Business Review has found that despite the popularity of 3-5 year business plans, 95% of a typical organization’s employees still have no clue about their company’s strategy.
  • Weave your plan into performance reviews. This helps leaders measure how well team members are executing on the individual level. (Yet, McKinsey found that 45% of companies create a strategy with no ability to track execution.)
  • Use the flexibility you baked into the plan. Expect new developments. When they arise, do not ignore them and do not overreact. Instead, make adjustments – and expect to discuss them in your upcoming 3-5 year business planning session.

3-5 Year Business Planning for 30-50 Year Success

Successful strategizing requires you to consistently implement all five steps: research, review, reach, refine, and realize. This is an ongoing process – treat it as such.

At First Midwest Bank, our goal is to help you achieve financial success. If you need help building a plan, connect with your commercial banker. We have experience working with businesses like yours, to build a roadmap for long term success.