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Long Term or Short Term Business Plans
1. In Business Is It More Important
to Think Long Term or Short
Term?
2. Prioritizing short-term projects in business can lead to significant ups
and downs compared to businesses that keep their focus on a long
term view. A short-term focus may also expose a business to greater
risks. A business characterized by short range planning to the detriment
of long term vision is likely to be less attractive to investors and
potential allies than a business with a strong long range mission and
clear plan for growth over the long haul.
3. Evidence for the Value of Thinking Years Ahead
A 2012 study by George Serafeim, Francois Brochet and Maria Loumioti
of Harvard Business School gathered provocative data on this issue. The
researchers' paper, "Short-termism, Investor Clientele, and Firm Risk"
categorized companies as short-term or long-term based on the
language each used and analyzed their financial status, including stock
performance. The short-term companies were riskier and tended to
attract short-term investors. Firms with longer-term visions were less
volatile, attracted long-term investors and had a lower cost of capital.
4. The Tension Between Short Range and Long Range Plans
Steady growth, even if it's slow, looks more stable to investors than
extensive ups and downs. Yet short-range projects give a business an
opportunity to test out new ideas, open new markets and take
calculated risks that may boost growth. Still, without long-term
planning and the ability to think ahead and plan for contingencies,
businesses increase their risk of adding to the grim statistics of
businesses that fail.
5. Finding Balance With Goal Setting
A tool for balance that's as valuable to business as it is for personal
resolutions is setting measurable goals. This involves writing specific
goals, evaluating each goal's viability and setting measures for
achievement. For example, a hat company decides to launch a junior
line for summer to expand its sales to a younger market. It sets specific
objectives: to launch a web page targeted for juniors and to distribute
to five junior shops with a goal of increasing hat sales by at least 10
percent.
6. Orders from the targeted web page and junior-specific retailers will
provide measurable data for evaluating the success of the campaign.
The short term results can guide long term strategy. The business will
be able to evaluate the cost of producing and marketing junior hats and
analyze how the hats affected profits for the season. By balancing long-
term thinking with strategic short-term plans, businesses of all sizes can
thrive in this challenging economy.
7. Jeff Ramson is a New York based Investor Relations expertwho
understands the value in understanding your companies short, and long
term goals.