Like many of you, I spent a fair bit of time in December working out my business strategy for the new year. I noticed a few things about the process that may be helpful to others:
1. Get a Coach. If I were not working with my business coach, I would not have written down my strategy and goals. That doesn’t mean I would not have had them, just that I’d be carrying them in my head instead of looking at them tacked to my bulletin board. I’m not a big fan of long business plans. Just a one-page guide is all I (or most small businesses) need. Had I not written down my one-page plan, the likelihood of my remembering or acting on my strategy would be significantly diminished. Do you have a written plan? There are many books out there–entire books on how to do a one-page plan!–and they are great resources. (Be sure to check out Tim Berry’s Plan-as-You-Go Business Plan.) To end up with one good page, you may need to gather many pages of data based on hours of research, but in the end it’s pretty simple:
- Start with an objective, numbers-based summary of the prior year. Sales, pre-tax profit, number of individual accounts, average revenue per account, margin per account, variable and fixed expenses, and any other things you consider drivers of the business.
- Go account by account and project how much more business you will receive from existing accounts this year; how many new accounts you will open; and how many you will lose.
- Will your pricing go up, down or stay the same? If you have a good business, it should go up if your value is going up. (Just for fun, read Seth Godin’s recent post on pricing.) Your value goes up the more each customer relies on you. As you build market share within an account, their switching cost rises. This makes you worth more to them. My prices have increased every year I have been in business and few customers have complained.
- Now you can project your revenues and expenses.
Do you need to have a month-by-month revenue and sales budget? Not necessarily. I do it quarter by quarter. There’s too much variation month by month; and I do my accounting on a cash instead of accrual basis. But I have a pretty good idea of what should be happening season by season, quarter by quarter.
2. Don’t Worry about Beating the Competition: Focus on AVOIDING Competition. In my franchise business, I am planning for an 88% increase in sales, which comes on top of a similar increase over the year before. But we’re in a recession, right? Not in the market segments I am focusing on. I have always had a distaste for competition, and like to go where others won’t find me. A business school professor of mine once called this competition-free-zone that entrepreneurs should aspire to “the space between the elephant’s toes.” I’ve had that image in my mind since I started my business. Where I find potential competition, my strategy is to turn foe into friend. I just gained a very smart business partner who was preparing to ramp up his marketing efforts in the same markets I have targeted. Instead, I will focus on marketing (since I am much further along than he is) and he will receive a steady stream of high-margin revenue. Win-win.
3. Hire More People. I am hiring a full-time account manager this quarter, another suggestion made by my coach. When I described to her my strategy and how it involved taking our base of several hundred active accounts, increasing our volume with each one and expanding the base at the same time, it became clear that I cannot rely on my very effective email and direct marketing alone to accomplish this goal. I don’t want a boiler room of phone callers. But I do realize I can’t own all the relationships any more. The business has become bigger than me. What a nice problem to have.
4. I am continuing to make investments in my businesses, particularly in CRM software and marketing.
What’s your plan for small business success in 2009?
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