Having spent some good quality time with some superb SME’s this week, it really highlighted to me how when your business grows, a new set of challenges appear mostly around strategy, culture and organisational development.
Running a large organisation it’s easy to take for granted the things that seem like business as usual for us, but business as ‘unusual’ for a fast growth small or mid enterprise. I’ve previously posted about what small businesses can learn from big businesses here. They are a good starter for ten.
The key things that a business owner needs to think about are: -
- Managing your growth better by not trying to be everything to everybody. Have a clear sales/customer strategy about who is going to deliver your objectives most quickly. I’ve seen so many small businesses dizzy with being so busy on delivering projects which deliver little real margin and distracting them from more profitable opportunities. Be careful about your ABC (Activity Based Cost) before committing your precious resources!
- Prioritising your resources behind those priority areas. In particular a regular review of who is in the right seat on the bus, where you spend your customer acquisition funds, rebate payments, who you extend preferential terms and why. Overhaul everything, recession or no recession with a frequency.
- Understanding the dragging anchors on your performance and taking action against them (low margin, high touch customers, or employee underperformance for example). The longer you leave it, the worse it gets and the the more you dilute your ability to be competitive or achieve your goals.
- Getting clarity on what you are doing it all for. What is the key outcome you need from your business? An exit, organic growth, runaway growth, a lifestyle? This bit seems to be missing a lot of the time and as a result, small businesses can easily drift. It will help massively in establishing what you need to achieve, with who, by when.
- Before appointing a board or non-executive directors think really clearly about what you need them to contribute. What skills are you missing, does it need to be a board position or a senior management position? Do you want someone sales focused or financially focused? Do you need someone to prepare you for sale, merger or investment? NED’s come in all shapes and sizes, so always be clear about what you want?
Understanding your competition is an important component of being in business.
Yes, you’re important. Your products, people and services. However, when did you last benchmark yourself against your most important competitor?
What are they up to? When did you last have a good look? It’s easily overlooked in the hubbub 0f everyday. Smart businesses take time out to understand the wider competitive landscape.
Here’s some simple tips for you to get started: -
- Download their last company accounts from companies house. They normally cost £1.00 a set. You can have a look at whether they’re growing, their cost structure, their profit, stocks, gross margins and cash situation.
- Is one of their executives speaking anywhere? Go listen to them. Hear what the culture is, how they motivate employees, how they see the market.
- Are they advertising? What are their key products? How do they compare against yours? What products do you have that you could position against them? What media are they using?
- See what keywords they may be bidding in on google adwords. What keywords might people be searching for in response to their ad that you might be able to hijack in google either through pay per click or organic search. Get a blog going quickly to bag some easy clicks or implement a PPC campaign. Seek advice if needs be.
- Get on their mailing list. Always good to hear what things they are saying. What tone are they using? What calls to action? What offers? Are you missing any tricks?
- Ask your customers. It’s surprising what they know. They may have been to a recent launch, had a titbit off of a sales rep or spoken to the CEO by phone. People will share quite readily if asked.
- Prepare a SPOT chart. A rectangle split into four. In each box write one of these words. Strengths, Opportunities, Problems, Threats then detail all of yours down under these headings. Then pretend to be your competitor and do the same thing and compare.
- Visit their website. Look at their news sections, special offers, announcements. What messages are they sending? To which markets and customer profiles? What product is on the homepage? Does this mean they might lose focus on some secondary products which might be your primary product offer?
- Follow them on social media. Check out this post I wrote on “The CIA in Social Media“.
- Allocate time to this. The clearer you understand where they are going, the easier it is for you to adjust your own strategy.
Chatting with a small business on the phone the other day, a quick conversation on the phone turned into an hours business clinic. The business involved was suffering the after effects of a decision, which seemed good at the time, but is later paying the price for.
I won’t do the detail on the why’s and wherefores of the specifics, but there was some good advice there, which was worthwhile to share. Again, this is linked to things that big businesses do well, that smaller businesses can learn from. In no specific order: -
1) Know what your end game is. Selecting which pieces of business to progress/not progress rely on you having your end game down somewhere in a basic plan. That sets the route for your business, the pace, the tone and utlimately the types of customers you want to attract.
2) Don’t over-commit yourself. If your resources are limited, concentrate on the things that matter. In the early days of a start-up, there’s a tendency to do any piece of business at any cost, just to get money through the door. If it totally overstretches you, it may be taking you away from more important potential higer value business opportunity. Don’t be a busy fool, turnover = vanity, profit = sanity.
3) Opportunity Cost. You have a finite amount of time in working week. Commit your time to achieving your plan. Filling your time with business which you don’t make much money from simply limits the amount of available time you have to do more important things, like looking for more profitable customers or developing your offering.
4) Don’t always offer trade credit if it’s stretching you, particularly if selling to consumers. Ask for cash upfront or if for a trade customer, where you cashflow may be stretched. Ask for part-payment up-front to cover your costs. Be brave! You’re not a bank or a charity. Or give an early payment incentive (if your margin supports it).
5) Gear up to grow. If you know your end game and you know what working capital requirements might be, you will be far more selective about which bits of business you can do. A good question to ask yourself is if a large customer walked through the door tomorrow, have you got the working capital to fulfill their order? They will be expecting credit, probably 30 days net. You’ll need to fund that. Can you do it?
6) ABC. When taking a large order, take into account all the activity based costs (ABC). What I mean is all the hidden costs of fulfilling the order. The stuff that takes loads of time. It’s tantamount to leaking profit.
7) Don’t get excited by the project, get excited by the profit. A common mistake I see is small businesses, particularly creative ones, being excited by a project and committing to it because it appeals to them. Do a clinical assessment of every opportunity, you’re not a charity. What’s in it for me? How much net profit in this piece of business taking into account all the running round, the trade credit and the other costs.