How do you establish a strategy to help your business succeed? There are lots of things you could, or even should be doing – but we’d argue that they all come down to just one thing. Here we explain what it is, and why it’s important.
So many millions of words have been written about business strategy that you’re unlikely to live long enough to read them all, even if your business could afford to wait – so here’s the whole thing in just one word: Measure.That’s it; measure. Dress it up any way you like, but the only way you’re going to be able to establish a strategy for success is by having accurate information on which to base business decisions.
Doesn’t matter if you’re a startup or an entrepreneur with a long-established and successful empire, the same is true (though you can bet your bottom dollar that the entrepreneur will be doing it already).
But what to measure? That’s simple too. Everything; even things you think can’t be measured, because the answer is there somewhere, if you dig hard enough. And keep measuring, because things are in a constant state of change. When you’ve taken action based on one set of measurements, you’ll need to measure again to see what the effect has been, and therefore what your next move should be.
Ten business strategy elements based on measurement
Study the market: You may have had a great idea to turn a hobby into a business, but if other suppliers have saturated the market already, look elsewhere unless you have a really strong and very different USP.
Understand your customers: Who is your typical customer? If you have the right profile, you can tailor your products to them. Perhaps it’s a widowed lady in the 70s with lots of disposable income. She loves your coach tours, but is unlikely to be bothered about an all-night foam party.
Understand your processes: What waste can you eliminate from your processes? Don’t think of this as merely physical items, though these are important, and may well have a value in recycling; but time can be slipping away too. Toyota saw its employees moving back down the car production line between every process. They called it ‘walking waste’, and it amounted to a significant proportion of time when employees were at work and doing the job properly, but adding no value to the bottom line.
Understand your competition: Do they have an edge on you? What is it? Don’t be afraid to ask your customers. You may discover something you’re doing that makes you less effective. If customers don’t want to tell you, that’s fine; you’ve lost nothing by asking.
Raw materials: Are you buying from the best supplier? Could you get a better deal by negotiation, or ordering larger volumes (but don’t tie up too much capital in stock, that’s a drain on resources). Would a lower-cost alternative have a detrimental effect on your product? If not, why aren’t you using it?
Marketing: Target this very carefully. Some channels can be extremely expensive. That’s not a problem if the return is commensurately high. However, you may think high-priced magazine advertising is bringing a good return, when in fact social media is doing a more cost-effective job for you.
The way to measure this accurately is to have different phone numbers for different channels. Business arising from each channel is therefore easily measured for comparison. Companies like Squirrel Telecom offer low-cost short-term phone numbers as part of an internet phone solution which delivers just this flexibility.
Pricing strategy.:Finance is always a tricky issue. It would be easy to be a busy fool, so your pricing strategy needs to be set in a way that ensures neither you nor your client are being robbed. If you think your client base would stand a price increase, be prepared to lose part of it in return for a higher net income from the ones who remain. Measure the potential difference – but be aware that if yours is a commodity product, clients may simply shop around for a lower price.
Value: Everything has a price. Everything. From the pens on your desk to your internet service provider; from your energy supplier to the tea bags in the kitchen. Although you need them all, you should seek to establish their value in use, and buy accordingly. This means you may not be buying the cheapest, but getting the best value for your spend.
We once saw a caretaker replacing cheap light bulbs sourced by his supplies department. The unit cost had been far lower than the nearest alternative, but he had to try nine before he found one that worked. Result? The cheapest option turned out to be one of the most expensive. (and he was wasting his time as well; see item 3).
Avoid unnecessary expense: Only by carefully and continuous monitoring of your costs using an app like free-to-download Solo Expenses will you be able to see exactly what your outgoings are. That’s another way of measuring, but with the added advantage that you can, and how to.
Don’t wait for payment: Some large companies have cripplingly-long payment terms, and expect to be allowed to ignore yours by paying you when they’re good and ready. This puts pressure on your cash flow, so you’d have to think long and hard about if it was wise to do the work at all.
Measure the cost of the potential delay on your operations. Is it early enough in the financial year so that a bad debt won’t roll over your financial year end and damage your results? Do you have other income streams? It may be that the kudos of working with a blue chip client comes t too high a price, and your business would be supported by a range of smaller, more understanding SMEs.