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Strategic planning is essential for successful business. The strategic plan, which is the starting point for developing operating budgets, involves five steps:
1. Define the company’s purpose, vision and mission.The purpose of the company is the reason it exists. For most companies, this purpose is to maximize share-holder value by maximizing profits. The vision of a company is how it plans to achieve its purpose. The mission of a company represents the specific manner in which the company plans to achieve its purpose and vision.
2. Set specific performance goals that are consistent with the company’s purpose, vision, and mission. For example, a specific performance goal might be to earn an 18% rate of return on stockholder’s equity for the coming year.
