Managers of small companies are often so busy fire fighting that thinking about a business strategy seems a needless distraction. But, says Dr Derek Ford, it could be a game changer.
Small businesses are widely seen as the key to boosting UK growth. Almost 60% of private sector jobs are provided by companies with less than 250 employees and the same firms account for nearly half of private sector turnover. However, 30% of new start-ups fail during their first year and 50% survive for less than seven years. Why?
Research shows that many new businesses fail because they lack a clear strategy to guide them through competitive markets. While large corporations can afford to have teams devoted to strategy development, small companies typically devote most of their energies to keeping the business afloat.
Taking time to think about the direction their business should be taking, however, can be a game changer. This is particularly true in hard economic times.
Developing a business strategy is not rocket science. Try considering the following. What is the main reason your customers buy from you – what is your company really good at? Are you valued for prompt delivery? Is your technology, product or service unique? Or is your main selling point providing quality service for which customers are prepared to pay a premium?
Consider how you can focus on your strengths and avoid wasting time and money on anything else; trying to be all things to all people is a common mistake made by companies desperate to take advantage of every business opportunity.
Then ask yourself if there are any factors that may throw your business off course in the future – is there a new technology or other market development that could pose a threat? Are your customers concentrated in a single industry sector that could go into decline? What plans can you make to overcome these risks?
Your answers to these questions will form the basis of your business strategy, guiding future decision making. Our experience shows that time spent in this way can pay huge dividends very quickly.
Dr Derek Ford leads the small business team of IfM Education and Consultancy Services at Cambridge Institute for Manufacturing. www.ifm.eng.cam.ac.uk/working