If you were to ask successful entrepreneurs for the recipe of the running of a prosperous small business, they would answer that it’s a mixture of good ideas, luck, timing, hard work and passion. But, while these are the traits that it takes to run a thriving small business, it takes different skills to put together a successful business strategy for your SMME. There’s little wonder, then, that small business owners often make mistakes when compiling their business strategy – and that these translate into the same pitfalls for many businesses. Here are a few of the typical oversights made by entrepreneurs when compiling their business strategy, and how to avoid them.
Focusing on processes rather than revenue goals.
When starting up your new business, it’s easy to outline a list of to-dos. For example, you need a logo and a website. You need to find office space at a good price, and you need to figure out a way to train your new employees. All of these are worthwhile activities, but they could distract from the main point of the business, which is to make sales. Gear your strategy not around things that need to get done, but the number of sales that need to be made and how you plan to achieve that.
Following the same road as the competition, but expecting a better outcome.
SMMEs often outline an aim to be the best in the business. However, they then go on to follow the same path as their competitors. For example, you may have visited a rural part of South Africa where locals are selling home-made curios and wares. If you pull into a market selling such products, it’s not unusual to be accosted by what appears to be the same curio being sold by eight different sources. The vendors use the same raw materials, craft their curios in a similar manner, and sell them all at roughly the same price. Each vendor hopes that his crafts will be the ones chosen by the customer, but in reality, there’s no reason why they would be. There’s very little hope of one business taking off faster than the others when all of them are living off the same borrowed ideas.
Instead, your business strategy needs to combine the wisdom of the past with your own inimitable ways. Learn from the examples of other companies and then combine those lessons with your own fresh ideas to outline a unique path for your company.
Focusing only on demand.
In their article “How to avoid the most common strategy mistakes”, BTI Consultants note the work of Michael Porter, a respected authority on strategy. “Mistakes often arise from executives focusing too strongly on customers and their needs, at the expense of all else,” the company notes. “Porter believes that, in too many companies, strategy is designed only around the ‘value proposition.’ Unfortunately, this technique only focuses on thedemand side of the competitive equation.”
While your company’s value proposition needs to be competitive and is essential to the success of your business, focusing your business strategy purely on the demand side of things leaves a gaping hole in the viability of your plan. Your business strategy has an equally important responsibility to ensure that supply is both adequately and cost-efficiently met.
Your SMME has potential for great success, and as the business owner, you can steer it in the direction of achieving it. Part of that is seeing its vision and strategizing in a way that translates your lofty ideals into workable steps. Avoid these three mistakes and you will be one step closer to arriving there.
If your company needs assistance in doing this, The Finance Team can assist. Our experienced strategists can help you compile your business strategy and then periodically help you re-assess the progress made in light of your vision.
Image credit – The Guardian