What Is the Importance of the Strategic Audit?
A strategic audit evaluates how appropriate your business strategy is and how well you are positioned to execute it. Particularly for a small business, periodic strategic audits can mean the difference between a road map to success and a drift into financial struggles caused by a poorly thought-out or outdated plan that doesn't reflect changing market conditions.
A strategic audit answers basic questions about the future of your business, both in the near term and the extended future. Some of the questions might seem basic. If you ask yourself "what business am I in?" you should already know the answer -- but think beyond the obvious. If you have a small clothing store, "selling affordable vintage clothing to teenage girls" is a different business than "selling prom dresses and formal apparel to high-schoolers." Also ask whether you're doing the right things as a business. If you're selling prom dresses in a market without a lot of teens, you probably need to reassess your strategy.
Strategic audits start by assessing your current strategy. Look at how your business sees itself in relation to the marketplace. Conduct a SWOT analysis to reassess the strengths, weaknesses, opportunities and threats to anchor both internal and external factors influencing success. Compare that to the strategic vision for your company. This offers an opportunity to map a path forward while simultaneously assessing whether you might be better off making an adjustment to increase your chances of success.
Businesses can go under because they fail to anticipate strategic risks. These are factors that rarely come up in a traditional audit but have massive repercussions if they occur. Risks might include a decline in demand for your core offerings or a critical manager departing for a competitor. A strategic audit brings these dangers to light and allows you to assess which ones are the most critical. It promotes proactively acting to avoid what could otherwise be a critical situation down the road.
A strategic audit allows you to map your goals to your resources and see where discrepancies lie. When the two don't match, either the goals need to be adjusted or the resources must be changed. For example, if your strategic vision says you'll bring innovative products to market on a regular basis and you don't have resources dedicated to research and development, you’re not giving yourself a chance to succeed. If you want to add two new stores in the next calendar year but have a negative cash flow at your existing location, you have to ask yourself whether that goal is affordable and realistic.
The strategic audit not only requires implementation, it requires a method for performance evaluation and control. Develop a measure-of-effectiveness plan to determine whether the implementation works as intended. Note who is accountable for each task and what metrics will be tracked. Also set a time frame for when your strategy will be re-evaluated in light of this data. Without periodic strategic audits, you might not know the environment has shifted and that you're now heading down the wrong path until it's too late.