Small Business Owner: You Need a Strategy. Now.
Crafting a Strategy for Your Small Business: A Step-by-Step Guide
I am going to say it 3 times, so it sticks:
Small businesses need a strategy
Small businesses need a strategy
Small businesses need a strategy
Why? Because it provides a roadmap for success. Without a clear direction and plan, it's easy to get lost in day-to-day tasks and lose sight of the bigger picture. A well-crafted strategy helps small businesses prioritize their limited resources and focus on what's most important for achieving their long-term goals.
One lesson that small businesses can learn from large corporations is the importance of aligning their strategy with their overall vision and mission. Large corporations typically have a clearly defined purpose and values that guide their decisions and actions. Small businesses can benefit from a similar approach and ensure that their strategy aligns with their core values and long-term vision.
I trust you have seen in real life or in pictures the David sculpture, by Michelangelo. It is impressive how a human being can sculpt out of marble such a masterpiece. Once, he was asked about the difficulties that he must have encountered in sculpting David. His reply was stunning: “You just chip away the stone that doesn't look like David”.
Even back in the 1500s, Michelangelo knew that any distractions were not good for his business. The same concept applies to all businesses, especially small businesses. It is easy to get distracted by “easy money” opportunities that don’t reflect who they are and what they do.
But how would you know if you don't have a strategy?
Let’s make sure I clarify something. Small businesses need to be just as agile, if not more so, than large corporations in order to stay ahead of the curve and respond to new opportunities or challenges. A well-crafted strategy must provide a framework for making decisions and taking action but also leave room for adjustments and course corrections as needed.
I can testify to this myself. Before COVID-19, none of my family members' business owners had a business strategy. Not even one. All they knew is that hard work pays off. When COVID hit them hard and I got engaged to help in modernizing their infrastructure, GTM plans, and product offerings, I managed to create with them a simple version of a 3 to 5 years strategy plan, similar to what we typically define in large enterprises.
By doing that exercise with them, I realized that the components of a business strategy for small businesses are similar to those of larger organizations, but they must be adapted to the unique needs and limitations of smaller operations, which makes it easier to define and maintain (aka. keep it alive).
A step-by-step guide to creating a business strategy for Small Businesses
Step 1. Craft the perfect Mission and Vision statements
If you have employees working for you for a long time, or in management positions, I recommend involving them in defining the Vision and Mission. You would be surprised how much they care.
These statements define the purpose of your business and the long-term aspirations you have for it. Let’s define them:
Vision: A statement that describes what your business aspires to be or achieve in the long term. It's a broad, future-oriented statement that guides the company's decision-making and inspires employees and stakeholders. Keep it short and ensure it doesn’t lock you too much to potential business expansions.
Mission: A statement that describes the purpose of a business. It's short-term and outlines what the company does, for whom, and how it serves its customers. A mission statement helps employees understand their roles and how they contribute to the company's goals.
To demonstrate that any small business can do better with a Vision and Mission statement, I will give you an example. My brother is a small business owner in Italy. He restores vintage wooden furniture. During COVID I helped him to boost his business, and he came up with what I think is a great Vision statement:
“To keep the memory of your loved ones alive, forever”
See, when someone brings him a very old piece of furniture that maybe was owned by her/his grandmother, it is all about that vision statement. It inspires him and his customers to care. I asked him to frame it and have it visible in the shop to his customers to help reduce pricing discussions with customers.
An example of a nice Mission statement from Curbside Landscaping: “To be recognized for quality, creativity, and, above all, fairness in the delivery of professional service.
Once your Vision (Open, long-term, inspiring statement) and Mission (shorter-term, how you do things and for whom) are ready, then we can move on to the next step:
Step 2. Define Goals and Objectives
Goals and objectives are important components of a business strategy. Many large enterprises use the term OKR, which stands for Objectives and Key Results.
Goals are high-level statements that define what a business wants to achieve in the long term, usually over a period of three to five years. I don’t recommend, especially for a small business, thinking beyond 5 years. The world changes rapidly, and it is in our interest to keep adapting rapidly to those changes.
Objectives are more specific and measurable statements that are designed to help the business achieve its goals.
For example, a small business might have a goal of increasing its revenue by 50% over the next three years. To achieve this goal, the business might set objectives such as increasing its customer base by 10% in year 1, launching a new product, adding product variations, expanding into two new geographic markets, etc. Each of these objectives should be specific, measurable, and time-bound. Typically, you define goals in a single fiscal year, semester, or quarter, but this depends on your specific business characteristics.
I hope you start to recognize the pattern here.
By setting goals and objectives, small businesses can create a roadmap for achieving their long-term vision and mission.
This roadmap can then inform the day-to-day decisions and actions of the business, from product development, marketing and sales, operations, etc., and will help prevent costly distractions and increase the focus of the owner and employees.
If your small business doesn’t have any of the above, I am going to draw a line here and ask you to start working on Vision and mission statements, 3-5 year objectives, and short-term goals.
Once you have the above defined, you can start working on additional critical elements. You will realize how much easy it is to work on these elements below once you have the objectives and goals complete. Why? Because there is little room for guessing and it is all about focus.
Step 3. Competitive Analysis
Competitive analysis is the process of identifying and evaluating the strengths and weaknesses of your competitors in the market. It is a crucial step in developing a business strategy because it helps you understand how your product or service compares to those of your competitors, and identify potential opportunities and threats.
To conduct a competitive analysis, you should start by identifying your competitors in the market. This could include companies that offer similar products or services. You can then gather information about each competitor, including their target market, pricing, marketing strategies, and product features.
💡 This analysis can be drastically different if you sell products or services online and physically, in your local market. If this is your case, the recommendation is to work on two different competitive analyses, one for online and one for the local business.
One simple but useful tool for conducting a competitive analysis is the SWOT analysis, which stands for Strengths, Weaknesses, Opportunities, and Threats. This framework can help you organize your findings and identify areas where your company can differentiate itself from the competition.
Strengths: What are the factors that give your competitor an advantage over you?
Weaknesses: What factors put your competitor at a disadvantage compared to you?
Opportunities: What opportunities do you recognize you have against this competitor, based on their strengths and weaknesses?
Threats: What factors could negatively impact your business based on your competitor’s strengths?
Ultimately, the goal of a competitive analysis is to use the information gathered to inform your business strategy and identify opportunities for growth and improvement. By understanding the strengths and weaknesses of your competitors, you can make INFORMED decisions about how to position your product or service in the market and differentiate yourself from the competition.
Stop guessing or even worse, stop assuming.
Step 4. Marketing and Sales Strategy
Marketing and sales strategy is the plan of action to sell your products or services. I am not going to expand much on this point because in my experience, this is where the majority of small business owners spend their time. Sometimes they spend too much time, and the main reason for this is that they lack a strategy.
Never forget: Trying to sell to everyone is like selling to no one.
It is critical that you align your marketing and sales strategies to every single point we have discussed so far, starting from your Vision and all the way down to the competitive analysis to be able to execute solidly.
Spending your marketing and sales money without a defined strategy is like running on a pitch-black trail. Once in a while, you will make it to the exit. The majority of the time you will go off-trail and even fall off a cliff.
Additional considerations on strategy
Operations and Logistics: Establish how your strategic plan aligns with manufacturing, delivering, and supporting your products or services. You want to make sure your mission, objectives, and goals also align with all the “backend” operations and not just sales and marketing.
Human Resources: Managing people is an essential part of running a small business. My wife is the Global Director of Compensation at a large enterprise company, and she is also an advisor to all our family businesses.
I asked her some tips for small business owners when it comes to managing their human resources:
Hire the right people: It is NOT just about hiring the right skills and experience. Remember, you do have a Vision and a Mission now, so your hiring should reflect that.
Provide clear job descriptions: This is a typical mistake small businesses make. A lot of the friction she sees between owners and employees is because the owner’s expectations are not aligned with the employees. Make sure your employees understand what is expected of them in their roles and what they will be held accountable for. It is OK to make changes, but those have to be discussed and agreed upon.
Set clear expectations: Let your employees know what is expected of them in terms of performance, productivity, and behavior. These aspects become critical to foster a healthy company culture.
Communicate regularly: Keep the lines of communication open with your employees. Regular check-ins and feedback sessions can help you identify and address any issues early on, and avoid unpleasant discussions.
Provide training and development: Offer your employees opportunities to improve their skills and knowledge. This not only benefits them but also your business as a whole.
Julio, a friend of mine owner of a L’Occitane franchise store asked me: “What if I invest in training them and then they leave?” My answer was: “What if you don’t train them, and they stay?”
Create a positive work environment: Foster a workplace culture that is supportive, collaborative, and respectful. This can help improve employee morale, retention, and productivity.
Recognize and reward good performance: We all love this. Recognize and reward employees who are doing a great job. This can help motivate them and encourage them to continue performing well and also sets a great example for the rest (aka. Everyone knows where the bar is, all the time).
Executing the business strategy
Building a plan that is aligned with your vision, mission, and values is the first key step to a successful business. However, is in the execution where the rubber hits the road. It is not easy, and you will realize that not everything we do will perfectly match our plan.
I have spent hours talking to successful business owners and asked them what are the secrets to making it happen:
Assigning accountability: It is essential to assign accountability for each task in the plan. This ensures that everyone knows their role and is accountable for the outcomes. Whether you are assigning accountability to your own employees, partners, or suppliers, it is important to ensure they know what is expected of them and what can they expect from you.
Communicating the plan: The plan must be shared with all stakeholders, including employees, investors (if any), and suppliers. You worked hard to build one, so be proud. It will motivate people to follow through.
Tracking progress: It is important to track progress against the plan and make necessary adjustments. Regular reporting and review of progress help identify potential issues before they become significant problems.
When tracking progress remember that one thing is to be flexible and make changes when needed, and a very different thing is to accept excuses and delays that are constantly pushing you out of a timeline.
Celebrating successes: Celebrating successes along the way can help build momentum and keep employees motivated to achieve the ultimate goal. This is not only something modern tech companies should do.
Staying flexible: The business environment is constantly changing, and the plan should be adaptable to reflect changes in the market, competition, and other factors. The ability to pivot and adjust the plan is critical to success.
I hope you found this week’s issue interesting and actionable. If that is the case, please subscribe.
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