Anne Stubbs, Author at MGI South Qld | Business Accountants | Audit and Accounting Firm

Small business owners are rarely short on ideas, effort or ambition. What is usually missing is a clear strategic business plan that connects day-to-day decisions to long-term direction, profit goals and real accountability. That is exactly what business strategic planning is designed to solve.

A well-built strategic plan helps a business decide:

where it is going (direction),
why it exists (purpose),
what it will focus on (priorities),
how success will be measured (goals and metrics),
and how it will be funded (financial plan).

Let’s take a practical, execution-focused approach to small business strategic planning, built around five core elements every strategic plan should include: the executive summary, mission and vision, SWOT analysis, business goals and a financial plan.

What is a strategic plan?

A strategic plan is a structured roadmap that defines where a business wants to go over the next 12 months to 3 years, what it will prioritise to get there and how progress will be measured.

It sits above day-to-day operations. Instead of listing everything the business does, it clarifies what matters most and what needs to change to reach the next stage of growth.

A strong strategic plan typically answers:

What is the business trying to achieve?
Who is it for and why does it matter?
What are the biggest opportunities and risks?
What goals must be met and by when?
What resources, capability and cash are required?

How do you create a business strategy plan?

Creating a business strategy plan is not about producing a perfect document. It is about creating a shared plan that drives better decisions.

A simple process that works well for small businesses is:

Get clear on direction (mission, vision, priorities).
Diagnose reality (SWOT, performance, constraints).
Set measurable goals (outcomes, KPIs, timelines).
Build a financial plan (budgets, cash flow, scenarios).
Create accountability (owners, cadence, scorecards).

For businesses that want a practical starting point, the Australian Government’s business planning guidance and templates can be a useful reference when mapping priorities, goals and actions.

The five steps below walk through this in detail.

The 5 steps of business strategic planning

Step 1: Write a clear executive summary

The executive summary is the “at-a-glance” version of the strategic plan. It should be short, specific and decision-useful.

What to include in the executive summary:

A one-paragraph overview of the business and its current position
The planning period (for example, the next 12 months, 24 months, or 3 years)
The top 3 to 5 strategic priorities
The most important business goals and how success will be measured
The key financial targets (revenue, margins, cash flow, funding needs)

Tip: If the executive summary cannot be understood in 2 minutes, the strategy is probably not clear enough yet.

Step 2: Define the mission and vision

This is the foundation. Without it, goals often become a random list of tasks.

Mission (why the business exists)

A mission statement should clarify:

who the business serves,
what it delivers,
and the value it creates.

A strong mission statement is:

customer-focused,
specific,
easy to repeat,
aligned to how the business actually operates.

Vision (where the business is going)

A vision statement describes what success looks like in the future. It should create clarity and alignment, not vague inspiration.

A strong vision statement includes:

a timeframe (for example, “in 3 years”),
the type of business being built (scale, service model, reputation, team),
the outcomes being targeted (market position, impact, lifestyle, profit).

Tip: Many small businesses have a “hidden” vision that lives only in the owner’s head. Strategic planning brings that into the open so the team can build towards it.

Step 3: Complete a SWOT analysis that drives decisions

A SWOT analysis is only useful if it leads to strategic choices. It should be honest, specific and grounded in evidence.

Strengths

What does the business do better than competitors and why?
specialist capability or expertise
loyal customer base
operational efficiency
strong brand reputation
strong referral network

Weaknesses

What is currently limiting growth or profitability?
owner dependency
inconsistent lead flow
pricing issues
skills gaps
poor reporting visibility
cash flow volatility

Opportunities

What is changing in the market that can be leveraged?
new segments
digital channels
partnerships
improved offers or packaging
operational improvements that unlock capacity

Threats

What could disrupt results if ignored?
rising costs
competitors undercutting pricing
regulatory change
key staff risk
customer concentration

Turn SWOT into strategy with these questions:

How can strengths be used to capitalise on opportunities?
What weaknesses must be addressed to unlock growth?
Which threats require a mitigation plan now?
What should the business stop doing to stay focused?

Step 4: Set business goals that are measurable and owned

This is where strategy becomes execution.

Business goals should translate priorities into measurable outcomes, with clear owners and timeframes. The stronger the goals, the easier it is to say “no” to distractions.

What good goals look like

Use outcome-based goals that can be tracked monthly or quarterly, such as:

Increase gross margin from X% to Y%
Lift average customer value by $X
Reduce delivery time from X days to Y days
Grow recurring revenue to $X per month
Improve cash reserves to cover X months of overheads

Build a simple goal framework

For each goal, define:

Metric: what is being measured
Baseline: current performance
Target: what “success” is
Deadline: when it must be achieved
Owner: who is accountable
Key initiatives: the 3 to 5 actions most likely to deliver the result

Tip: Small business strategic planning often fails because goals are set without owners and initiatives are listed without measurement.

Step 5: Create a financial plan that makes the strategy real

A strategy that cannot be funded is not a plan, it is a wish.

The financial plan turns the strategic business plan into numbers and helps answer:

Can the business afford this plan?
What cash flow pressure will show up first?
What must improve for the plan to work?
Is external funding required?

What to include in the financial plan

Profit plan: revenue targets, cost structure, margin goals
Cash flow forecast: timing of receipts and payments, cash buffer needs
Budget by category: labour, marketing, overheads, software, contractors
Capital expenditure plan: equipment, systems, fit-out, vehicles
Funding strategy: debt, equity, retained earnings, working capital facilities
Scenario planning: best case, expected case, worst case

Tip: A common small business issue is building a growth plan that increases sales but quietly destroys cash flow. A proper financial plan prevents that.

What should be included in your strategic plan?

If the strategic plan is being built from scratch, use this checklist as the “minimum viable” structure:

Strategic business plan checklist

Executive summary
Mission statement
Vision statement
SWOT analysis (with key implications)
Strategic priorities (3 to 5)
Business goals and KPIs (owned, measurable, time-bound)
Key initiatives and projects
Financial plan (budget, forecast, cash flow, scenarios)
Risks and mitigation actions
Cadence for review (monthly, quarterly, annual)

If the plan is longer than it needs to be, it becomes shelf-ware. If it is too short, it becomes vague. The right length is whatever makes it usable.

How do you ensure the plan stays on track?

Most strategic plans fail because the business returns to “busy mode” and the plan is not reviewed.

To stay on track:

Assign owners to every goal and initiative
Set a review rhythm (monthly scorecard, quarterly planning day)
Use a simple dashboard (5 to 12 metrics, consistently tracked)
Schedule accountability (management meeting agenda includes progress, blockers, decisions)
Update the plan when assumptions change, rather than ignoring reality

Many businesses also benefit from an external adviser who can facilitate strategic sessions, challenge assumptions and maintain accountability when priorities drift.

FAQs: Business Strategic Planning

What is a strategic plan in a small business?

A strategic plan outlines the business direction, priorities and measurable goals for the next 12 months to 3 years, including how progress will be tracked and funded.

What should a strategic business plan include?

At a minimum: an executive summary, mission and vision, SWOT analysis, business goals with KPIs and a financial plan covering budget and cash flow.

How long should a strategic plan be?

A good strategic business plan should be long enough to be clear, short enough to be used. Many small businesses succeed with a concise plan supported by a one-page summary and a metrics dashboard.

How often should a strategic plan be reviewed?

Performance should be reviewed monthly, with deeper planning reviews quarterly. The plan itself should be refreshed at least annually, or sooner if market conditions change.

What is the difference between a strategic plan and a business plan?

A strategic plan focuses on direction, priorities and measurable goals. A business plan often includes broader operational detail and may be used for funding or formal planning purposes. In practice, the best plans combine both, while staying readable.

Why is a SWOT analysis important in strategic planning?

A SWOT analysis identifies what is helping or limiting the business, where opportunities exist and what risks need to be managed. It supports better strategic decisions, rather than relying on assumptions.

What are common mistakes in small business strategic planning

Common issues include vague goals, no financial plan, too many priorities, lack of accountability and no review rhythm to keep execution on track.

Ready to turn strategy into action?

A strategic plan is only valuable if it is implemented. MGI South Qld’s Business Coaching team helps business owners build a practical strategic business plan, translate it into clear actions and metrics and stay accountable through regular check-ins and performance tracking.

If you’re ready to set clear goals for your business, contact us today to create a roadmap for your business.

All content provided on this blog is for informational purposes only. While every caution has been taken to provide readers with most accurate information and honest analysis, please use your discretion before taking any decisions based on the information in this blog. Author will not compensate you in any way whatsoever if you ever happen to suffer a loss/inconvenience/damage because of/while making use of information in this blog. For more personal advice, contact one of the team who will be happy to discuss relevant issues specific to your personal circumstances.

So often we read or hear in the media about the latest fast-growing business. Everyone seems to focus on the growth of the business but what is the real measure of business success? One of the key measures that accountants and business consultants look for when reviewing the financial performance of a business, is Return on Capital Employed (ROCE). Generally, if this rate of return isn’t high enough it is usually a sign that some things aren’t quite right in the business. But what is ROCE, how is it calculated and what levers can you pull to help improve it?

ROCE is a key performance measure because it focuses on the relationship between the inputs and outputs of the business. In accounting speak; the inputs of a business are included in the balance sheet – things like stock, debtors, creditors, plant & equipment etc. The outputs are included in the profit and loss statement – things like sales, cost of sales (or margin), expenses etc.

What is ROCE (Return on Capital Employed)?

Return on Capital Employed (ROCE) is a key financial metric that measures how efficiently a business is using its capital to generate profits. It helps business owners assess their company’s financial health and performance, making it a crucial indicator for investors and stakeholders.

How is ROCE Calculated?

ROCE is calculated using the following formula:

Where:

Earnings Before Interest and Tax (EBIT) represents the company’s operating profit before interest and taxes.
Capital Employed is the total assets of the business minus current liabilities (or total equity + non-current liabilities).

A higher ROCE percentage indicates better capital efficiency and profitability. Now, let’s explore seven effective ways to improve your business’s ROCE.

So How Can You Boost Your ROCE?

Improving your ROCE (Return on Capital Employed) is essential for long-term business success. By optimising costs, increasing revenue, managing assets efficiently, and making strategic financial decisions, you can significantly enhance profitability.

1. Optimise Operating Costs

Reducing unnecessary expenses and improving cost efficiency can significantly boost ROCE. Consider:

Negotiating better supplier contracts to lower procurement costs.
Automating repetitive tasks to reduce labour expenses.
Reviewing utility costs and switching to cost-effective alternatives.

By cutting operational waste, you improve profit margins, enhancing the return on capital employed. Look at the percentage that your pre-tax profit bears to your sales. Ideally, you should be looking at EBIT or earnings (profit) before interest and tax. The higher this percentage the better, but as a guide a profitability percentage of less than 5% is too low.

Generally, you’ll find that focusing on margin will yield the biggest ‘bang for buck’ in lifting profitability, but sometimes we let expenses get out of hand.

2. Increase Sales Revenue

Higher revenue leads to a stronger ROCE. Strategies to increase sales include:

Expanding into new markets or launching new products/services.
Enhancing customer retention through loyalty programmes.
Upselling and cross-selling to existing clients.

Driving revenue growth while keeping costs controlled will boost capital efficiency. One of the key influencers of your profitability percentage is your gross profit margin. If your profitability percentage is too low then the chances are you’re not making enough margin on your sales. Some businesses reduce margin in order to generate additional sales. Depending on the stage of the business cycle you’re in, this can be a road to destruction.

For small (or micro) businesses, scale can be a problem. This is because you’ve got fixed costs just to open your doors. That means that until you reach a critical mass, you’re likely to run at a loss. But don’t chase volume (or sales) for the sake of it. At the end of the day, you need to make a profit on what you sell. Once you reach your ‘break even’ point you should focus on building margin, so that you make more profit.

3. Improve Asset Utilisation

Efficient asset management can enhance return on capital employed. To achieve this:

Eliminate underperforming assets that are not contributing to profitability.
Lease rather than buy capital-intensive equipment to maintain flexibility.
Improve production efficiency to reduce downtime and increase output.

Maximising asset productivity ensures that every dollar of capital contributes to business growth.

Sometimes business accumulate unnecessary assets that are no longer needed. This represents real cash which can be freed up by offloading these assets. Businesses can sometimes have a “lazy” balance sheet. This means that may have excess plant and equipment, excess stock holdings or debtor management has deteriorated. Cleaning up a “lazy” balance sheet is essential for good business performance.

4. Reduce Debt Levels

Excessive debt increases financial risk and impacts ROCE negatively. Lower debt by:

Refinancing existing loans at lower interest rates.
Using retained earnings for reinvestment rather than excessive borrowing.
Strengthening cash flow management to minimise reliance on external funding.

A lower debt burden improves capital efficiency and profitability.

5. Enhance Working Capital Management

Efficient working capital management can improve ROCE by optimising cash flow. Key areas to focus on:

Shortening debtor collection periods to accelerate cash inflows.
Negotiating longer payment terms with suppliers to preserve liquidity.
Managing inventory effectively to prevent overstocking or understocking.

Keeping working capital lean ensures more capital is available for high-return investments.

6. Invest in High-Return Projects

Not all investments generate the same returns. To improve return on capital employed, prioritise projects that:

Deliver strong, long-term profitability.
Align with your core business strengths.
Offer a competitive advantage in the market.

By investing wisely, you ensure capital is employed in the most profitable areas of your business.

7. Continuously Monitor and Adjust Strategy

Regularly reviewing your ROCE ensures that you stay on track towards financial efficiency. Best practices include:

Conducting regular financial analysis to track trends.
Benchmarking against industry standards to identify improvement areas.
Seeking expert financial advice to refine your business strategy.

A proactive approach to financial management helps maintain a strong return on capital employed over time.

At the end of the day, ROCE drives business value. If you want to increase the value of your business then focus on increasing your ROCE. Business benchmarking is a great way to see how you compare to other businesses in your sector or industry. And working with a business coach can help you get some external perspective and identify the low hanging fruit to improve your profitability.

Give the business growth team at MGI a call and let us help you improve your ROCE.