According to Confucius, "An unpointed arrow never reaches its target." Yet, how many small business owners don't do any strategic planning, hoping that floating in the wind will bring them a bulls-eye and success?

Arguably, strategic planning is even more important to many small businesses, including start-ups, technology companies and those in highly-competitive markets, so it's critical that small business owners create and follow strategic plans. Plus, it's New Years Day. What better time to start strategic planning for your small business?

Sure, finding a simple way to quickly build a strategic plan is much of the problem. While the Balanced Scorecard is, in many ways,  a better strategic planning system, it takes quite a while to develop a strategic plan using Balanced Scorecard and requires training in the methodology to carry out effectively. As a result, the Balanced Scorecard is rarely available to small businesses, who can not afford to hire an expert facilitator for a multi-week endeavor.

Should small business owners simply give up, assuming good strategic planning is out of reach? Of course not. There is an effective way for small businesses to create and executed strategic plans - the Four-Funnel model. While not as good as the Balanced Scorecard, in my opinion, the Four-Funnel approach is simpler, faster and can be done by a business as small as one or two individuals.

In this article, I outline the Four-Funnel model, describe how it can help small businesses to create solid strategic plans.

A Little Four-Funnel Background

I originally encountered the makings of the four-funnel strategic planning approach in business school at RH Smith at the University of Maryland, where Dr. Brad Wheeler (now at Indiana) described a four-funnel approach to problem-solving. In his approach, he drew four funnels on a white board and labeled them, "Identify Problems", "Prioritize Problems", "Identify Solutions" and "Select Solutions". The diagram looked something like this:

As you can see, the four funnels represent the increase and decrease of information as you complete each step in the problem-solving process. First, identifying problems gives you a list possible problems; prioritizing those problems reduces the list to only those problems that are most important; identifying solutions gives you a range of solutions for each problem; while selecting solutions again reduces your list to only the best solutions for the most critical problems. In short, there's really nothing radical about four-funnel problem-solving, but it's simple and it works.

Fast-forward to our strategic management course (also at RH Smith), where we were expected to use business cases to develop strategic plans in a matter of hours. Certainly, we learned the strategic planning process in depth during the class, but our challenge was to deliver a good plan in a very short period of time, particularly for case competitions. In response, my team and I applied the four-funnel approach, this time to strategic planning:

Since then, I've used four-funnel with my own small business more than a half-dozen times, while coaching other small businesses through the process. It only takes a half-day or so to do, so it's not too much time and effort, considering the big payoff.

Four-Funnel Strategic Planning Steps

Ready to start? Here's each step:

1. Identify strategic needs. Using SWOT analysis or a similar technique, write down the strengths, weaknesses, opportunities and threats relevant to your company and your industry. Many of these are easy to identify -- a competitor just moved in down the street (Threat), only one staff member knows how to operate a particular machine (Weakness), you just received recognition as the best in your region at what you do (Strength); or, one of your vendors just created a new product and offered you exclusive distribution rights in your area (Opportunity).

2. Prioritize Strategic Needs. Along with your co-workers you're bound to come up with some very solid strategic needs, especially if you do a little homework about industry trends before you meet. But, if you stop there and try to achieve all of them, you'll almost certainly fail. Before you move forward, you need to prioritize your strategic needs, eliminating the ones that are least likely to be successful and produce the least value. I suggest narrowing down your list to four or five strategic needs for your entire business if you have fewer than ten people, and no more than three needs per department (e.g, marketing) if you're larger.

3. Identify Strategic Actions. For each high-priority strategic need, brainstorm ways to meet that need or take advantage of that opportunity. Your possible actions don't need to be long or detailed -- a one sentence explanation is enough. And, be sure to give everyone an opportunity to suggest actions -- you'll be surprised when you find that the most innovative marketing ideas don't necessarily come from your marketing manager or the best technology initiatives don't come from IT.

4. Select Strategic Actions. Just as you prioritized strategic needs, you need to do the same for your actions. For each high-priority strategic need, pick one or two of the best actions for you and your business to take during the coming year. Make sure their achievable and affordable - no point in risking your current business on a long shot.

5. Assign and Act. As a team, assign someone in your business to complete each strategic action. As you do, make certain the person assigned has the authority, knowledge and resources -- including funding -- to complete the action. If they don't, you're merely setting them -- and you -- up for failure. In addition, be sure to stagger out the deadlines for each strategic action throughout the course of the year. Otherwise, you and your team will spend December rushing around to complete them, learning to hate the strategic planning process rather than appreciate its value.

Does it Work?

It's not a miracle cure-all, but the four-funnel approach does work. In my experience, businesses who adopted four-funnel strategic planning grew around 20-30% per year, while those same businesses grew at 0-10% before hand.  (My own business grew triple-digits every year but one, so of course I'm a big believer in four-funnel).  As a lawyer would say, that's not a guarantee of future success, but past results have been good. 

When you try the process yourself, you'll find it takes between four and eight hours for a group of three or four to complete the four-funnel approach, depending upon the size of your business. That's not much of a time commitment, considering it's going to benefit your organization for the next year, and beyond.

Give it a try. And, if you like some assistance, contact Cedar Point Consulting and we can help.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy.  Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.