Building a Strategic Plan Using a 36 Month Planning Horizon

Imagine this: A business contact of yours calls you and says, “I have a great opportunity that is going to present itself in the second quarter of next year. I need to know, quickly, whether you want to participate in this. It will take about a half-million dollars, but it is a golden opportunity.” As he outlines the opportunity, it does sound good. But you say to him, “My budget isn’t ready for next year.  We’re just in the budget process right now. I don’t know if I’m going to have room in my budget to participate in this venture.”

If your budget is an annual calendar budget that runs through Dec. 31, you have no way of objectively testing the impact—financial or operational—of an opportunity that won’t arise until the second quarter of the next calendar year. Your strategic plan planning horizon is too short.

Start putting together a 36 month rolling horizon for your strategic plan goals. Don't limit your planning horizon to budgets, but also set a three-year rolling horizon for staff, markets, capital formation—everything that has importance to your strategic plan goals.

At the end of the first three months, the details for the next 12 months are adjusted or revised with a new starting point. You are always maintaining between 12 and 15 months of a detailed plan, and you add an additional 24 months of a non-detailed plan beyond that. If you never have a horizon of less than 36 months overall, you will be able to test the impact of your decisions before you make them.

How do you test the impacts? If you have a financial model of your business, you plug the decisions into the modeling. You project the investment level the decision will require; you project whether you can afford those dollars in your capital structure; you project whether your cash flow is sufficient. Try out the decision in your operation plan to see whether it would take people away from other critical parts of your operation to the detriment of those operations.

Your planning team should create options that supplement the goals set forth in your company’s strategic plan. The team must identify each of its members’ responsibilities. Collectively, these responsibilities should integrate into all the activities needed to achieve your company goals. Once the planning team has reached a consensus on the goals that collectively make up the strategic plan, the team can focus on the specific activities needed for each area of the company to reach those goals.

Your planning team must identify the critical success factors required to reach each goal. Each proposed success factor must be challenged as to why it is critical in attaining its specific goal. There must also be clear time frames for achieving each success factor. Otherwise, there is no way to monitor whether you are making adequate progress toward your company goals.