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A recent study found that only about 39% of small businesses end up profitable. But why?
Many companies fail to make a profit because of a flawed business strategy. Sometimes, a strategy may be so complex that the team simply can’t execute it. In others, the problem may be clear, refined goals but no overarching strategy or plan for reaching those targets.
Another business strategy failure might lie in looking only at the short term rather than panning out to see and prepare for what’s likely to happen down the road.
However you slice it, a failure to plan is a plan to fail, while having a robust and sharp business strategy increases the likelihood of small business success.
Here are five hacks for building a more effective business strategy and equipping your SMB for long-term success.
Related: 7 Outdated Habits That Will Paralyze Your Business
1. Target your market
A small business can’t be everything to everyone. It’s essential to know the best audience for your products or services. Clearly defining your target customer helps shape your goals and develop a strategy that positions your business for success.
After you’ve targeted the right market, you can determine how to reach and convert those target prospects into paying customers. This includes asking important questions, such as “what media does my target audience use?” “What complementary products do they use?” “What providers currently serve them, and what can I do better to persuade them to become my customers instead?”
Targeting is the key to developing your media and partnership strategy and refining your product.
Related: 10 Ways to Learn About Your Target Audience
2. Make your strategic plan comprehensive
A solid strategic plan includes clear, concise vision and mission statements supported by goals and action plans. With these components in place, your strategy has focused objectives and roadmaps needed to move in the right direction.
A vision statement conveys where you’d like to see your company in the future. For example, a ceiling fan manufacturer’s vision statement may outline an aspirational desire to become the go-to for home cooling products. The mission statement ties to that vision but is generally more practical. A mission statement describes precisely what you do and why or how you do it. For example, “We will create quality, innovative ceiling fans to keep the world cool.”
Savvy entrepreneurs generally obtain buy-in from their team through their vision and mission statements. These statements are essential motivators because they tend to outline how your work improves the world. They also help focus the company’s direction.
It’s important to review your mission statement from time to time. The ceiling fan manufacturer might decide to produce other types of fans or air conditioning units. These products would likely still fit within the company’s vision, even though the new products would necessitate an expansion of the mission statement (beyond ceiling fans).
Goals describe what you aim to do by a specific deadline. Goals can focus on processes, behaviors, or outcomes. For example, a process goal might be refining your manufacturing processes to gain ISO 9000 certification within five years. A behavioral goal might be to reduce workplace absenteeism by 10% within two years. An outcome goal might be to grab a 51% market share within six years.
A fully developed strategy will also have action plans that describe what you’ll do to achieve each goal. For instance, the goal of reducing workplace absenteeism might include an initial action of surveying workers to discover why rates are so high.
Related: 8 Ways to Stay Accountable With Your Goals
3. Remove the extraneous
Sometimes strategies fail because they include too many barriers.
For example, you may have too much unimportant data, so you’re likely spending unnecessary time and money on data collection and analysis. Or, your processes may include nonproductive, redundant tasks that simply consume too many resources.
It’s crucial to look at all aspects of your strategy and ensure your roadmap is optimized and straightforward.
Related: 4 Reliable Signs Someone Is About to Waste Your Time
4. Focus on the brand
Developing a solid brand identity is a critical component of an effective strategy. Your brand is more than just a product or service; it includes your business values and how they are communicated through the brand. Your website should reflect those values. For example, an IT consulting firm probably wouldn’t want old-school fonts all over its website, nor would it aim to build a website that provides a poor user experience.
Remember that customer service impacts brand identity, too. In the age of online sharing and commentary, just one poor customer service is likely to generate poor online feedback, which can snowball and become a brand crisis in a hurry. That’s why your branding strategy should also include ways to consistently provide stellar customer service and exceptional experiences.
5. Play the long game
You want your business to be successful over the long term. To ensure longevity and consistently positive profit margins, it’s critical to revisit your business strategy regularly. This is the best way to ensure it remains relevant and avoid getting mired in an approach that is dated or no longer works.
As part of regularly reviewing your strategy, consider the customer’s journey from the customer’s perspective. How can you improve it? Also, consider customers’ changing needs and how to meet them.
It may also be necessary to scale your business and continually evolve your strategy. Often, scaling your business means adopting an automation strategy. It also may mean using outside resources for some aspects of your business, such as back-office functions, so that your team can focus on the core aspects.