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If you are to achieve your strategic goals, they must make sense economically.
- The normal budgeting process often prevents strategy from happening. When future revenue and expense projections come mainly from historical performance, you end up funding the past rather than your strategy for the future. It becomes difficult to see how you can provide additional expense funding for strategic initiatives.
- Strategy development provides the organization with a portfolio of strategic initiatives, usually with both current and future revenue and expense implications. You must establish the priority of these initiatives both in terms of their economic impact and their importance to the fulfillment of your organization's mission.
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| Business Plan Creation |
- Identifies the revenue and expense implications of the strategic initiatives.
- Expresses and quantifies the assumptions upon which revenue and expense projections are based.
- Weans financial and other managers away from over-reliance on historically-based financial projections and decisions.
- Provides lenders with an independent, comprehensive understanding of the market and financial feasibility of the proposed venture, along with the capability of those proposing the venture.
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Capital and Operating Budgets |
- Makes explicit the short-term and long-term financial consequences of strategic initiatives.
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Overall and Long-Range Organization Financial Plan |
- Offers a portfolio of strategic initiatives matched to financial consequences.
- Directs the organization's investment in those strategic initiatives most likely to yield optimal results.
- Provides a basis for monitoring the financial results of new ventures against expectations.
- Enables financial health to be viewed in terms of a comprehensive, long-term financial horizon.
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