Business Strategy for Small Business: A Guide to Success

As a small business owner, you wear multiple hats - from CEO to marketing manager, and everything in between. With limited resources and a tight budget, it's easy to get caught up in day-to-day operations and lose sight of the bigger picture. That's where a solid business strategy comes in.

A well-crafted business strategy helps small businesses:

- Clarify their mission and vision

- Identify target audiences and unique value propositions

- Develop effective marketing and sales plans

- Allocate resources efficiently

- Measure progress and make data-driven decisions

Here are key elements of a successful business strategy for small business:

1. *Define Your Niche*: Identify your target audience and their needs.

2. *Set SMART Goals*: Specific, Measurable, Achievable, Relevant, and Time-bound objectives.

3. *Develop a Unique Value Proposition*: Clearly communicate your products/services benefits.

4. *Focus on Customer Service*: Build strong relationships with your customers.

5. *Monitor and Adapt*: Regularly review and adjust your strategy as needed.

By implementing a solid business strategy, small businesses can:

- Increase revenue and growth

- Improve customer satisfaction

- Gain a competitive edge

- Achieve long-term success

*Stay Tuned...*

In our

[29/08, 6:49 pm] Meta AI: *Business Strategy for Small Business: A Guide to Success*

As a small business owner, you wear multiple hats - from CEO to marketing manager, and everything in between. With limited resources and a tight budget, it's easy to get caught up in day-to-day operations and lose sight of the bigger picture. That's where a solid business strategy comes in.

A well-crafted business strategy helps small businesses:

- Clarify their mission and vision

- Identify target audiences and unique value propositions

- Develop effective marketing and sales plans

- Allocate resources efficiently

- Measure progress and make data-driven decisions

Here are key elements of a successful business strategy for small business:

1. *Define Your Niche*: Identify your target audience and their needs.

2. *Set SMART Goals*: Specific, Measurable, Achievable, Relevant, and Time-bound objectives.

3. *Develop a Unique Value Proposition*: Clearly communicate your products/services benefits.

4. *Focus on Customer Service*: Build strong relationships with your customers.

5. *Monitor and Adapt*: Regularly review and adjust your strategy as needed.

By implementing a solid business strategy, small businesses can:

- Increase revenue and growth

- Improve customer satisfaction

- Gain a competitive edge

- Achieve long-term success

*Stay Tuned...*

In our next installment, we'll explore business strategies for medium-sized businesses, followed by a deep dive into strategies for large enterprises. Whether you're just starting out or leading a global corporation, we've got you covered.

*Coming Up:*

- Business Strategy for Medium-Sized Business: Scaling for Success

- Business Strategy for Large Enterprise: Driving Innovation and Growth

Crafting a winning business strategy

In today's fast-paced business landscape, a well-defined strategy is crucial for success. A business strategy serves as a roadmap, guiding your company towards its goals and objectives. It helps you navigate the competitive market, allocate resources effectively, and make informed decisions.

A winning business strategy consists of three key elements:

1. *Clear Vision*: Define your company's purpose, mission, and values. This will help you stay focused on what matters most.

2. *Market Understanding*: Analyze your industry, target audience, and competitors. Identify areas of opportunity and potential threats.

3. *Actionable Plan*: Set specific, measurable, achievable, relevant, and time-bound (SMART) goals. Outline the steps needed to achieve them, and allocate resources accordingly.

A effective business strategy also involves:

- *Innovation*: Stay ahead of the curve by embracing new technologies, trends, and ideas.

- *Adaptability*: Be prepared to pivot when circumstances change or new opportunities arise.

- *Sustainability*: Ensure your strategy aligns with your company's long-term vision and values.

By crafting a comprehensive business strategy, you'll be better equipped to:

- Drive growth and revenue

- Build strong relationships with customers and partners

- Stay ahead of the competition

- Achieve your company's full potential

Remember, a business strategy is not a static document – it's a dynamic guide that evolves with your company. Regularly review and refine your strategy to ensure you're on track to success.

Chapter 8: Responsiveness

Every situation good or bad presents an opportunity. It’s up to us if we use it for our good or bad. Same logic applies in business. Let me explain it with a very recent example. This is very popular topic nowadays in India. Indian Prime Minister Narendra Modi recently announced that old notes with 500 and 1000 denominations will no longer be valid. This step is taken by Indian government to act against black money.

This news came on November 8^th, 2016 in the evening somewhere around 8 o’clock in the evening. Old notes of Rs 500 and Rs 1000 were going to be invalid from midnight of 8^th November. Everyone thought that it’s a big problem as they won’t be able to transact. However very few saw an opportunity in it. On the same night I got a text following message from one of the supermarkets

‘We are OPEN till 11:50 pm TODAY. We welcome you to shop at the nearest store’.

This store turned this situation into an opportunity, whereas others thought it was problem. They tried to maximize their sales within few hours of one night. Management should be very fast in responding to any unusual change in the market. Often government policies have impact on business. In every situation management should carefully analyze circumstance and find how the business can benefit from it.

Responsiveness is key for every business to derive benefit from any and all changes happening within its environment. 

Chapter 7: Sales and Service

Primary purpose of any business is to sale its product so that it can make money. Any organization has to build a customer base to whom it can sell its product. Apart from building a customer base, retaining customers is also equally important for long term survival. One loyal customer is more valuable than ten customers who are not loyal towards the product of the company.

In this chapter we will cover two aspects:

• .      Building a customer base
•      Retaining customers

Building a customer base

This is the first step towards customers. The way an organization approaches customers depends on nature of business. If the company is in retail business marketing through television advertisements is the most common way to inform consumers about your products. Sometimes you can see two brands competing with each other through advertisements also. Cold drink brands Pepsi and Thums Up are always engaged in war. They literally challenge each other through their advertisements.  

Door to door marketing is also a good way to build customer base. Companies send their salesmen door to door to sell their product directly to consumers. Introducing discount offers, free gifts is also a good way to attract customers.

Retaining customers

Retaining customers is equally important for any business to survive. Nowadays with so many competitors in the market selling same product getting a loyal customer has become very difficult. The only way to retain a customer is to give a good quality product at reasonable rate. An organization should keep on improving quality of its product/service. As explained in chapter 3: Life Stages (Part 1) introducing new features to product is very important.

Just selling a product/ service to a customer is not enough, seller need to keep in touch with the customer even after the product/service is sold, because customer has a very week memory. They will forget you soon if you are not in touch with them. If the consumer is facing any problem with the product/service, the company should make a sincere effort to solve that problem.

So in simple words key to success in a business is build and maintain good relationship with customers.

Chapter 6: Business Segmentation

A segment is a component of a business that is or will generate revenues and costs related to operations. Financial information should be available for a segment's activities and performance and must also be periodically reviewed by the company's management before a decision can be made regarding the amount of capital that will be given to the segment for a particular operating period.

                                                                                                                Source: Investopedia

Quite big definition. I have a smaller one, easy to remember and simple to understand. Definition is ‘Divide and Rule’. This chapter is specifically for those businesses which are

• Involved in producing different types of products and providing different types of services
•  Doing business in different geographical location
• Type of consumers- e.g. retail and wholesale, consumers in different age group etc

By and large these are the only two basic criteria on which a business can be segmented. Rest all types of segmentation are just different versions of above two. Let’s take an example of a company in FMCG sector.

Company A is in FMCG sector. Its product portfolio includes bathing soap, shampoo, biscuits, juices, chocolates, fairness cream, shaving cream and dishwash bar. This business can be bifurcated into three segments.

Company A can measure performance by analyzing profitability of these three segments.

Fig in USD Mn

Particulars	Food Items	Beauty and Skincare products	kitchenware product	Total
Sales	150	600	750	1500
Direct cost	80	450	800	1330
Direct cost % to sales	53%	75%	107%	89%
Gross Profit	70	150	(50)	170
Gross Profit % to sales	47%	25%	-7%	11%

11% of gross profit on a revenue of USD 1500 Mn. Now if management wants to find out ways to increase profitability both in terms of margin percentage and absolute margin numbers it should drill down in to segments.

As you can see in above pie chart kitchenware products contributes to 50% of the company’s total sales, but if you look at the gross profits of each segment this segment is eating into company’s profits. If company A abandons this segment, scenario would look like this

Particulars	Food Items	Beauty and Skincare products	Total
Sales	150	600	750
Direct cost	80	450	530
Direct cost % to sales	53%	75%	71%
Gross Profit	70	150	220
Gross Profit % to sales	47%	25%	29%

In the new scenario the sales has come down to USD 750 Mn but now margins have improved both in terms of absolute numbers and percentage. Now among the two segments food items segment is much better in terms of percentage but that does not mean that the other segment should be abandoned. Although the gross margin percentage of beauty and skincare segment is lower than food items segment, in absolute terms this segment is generation more gross margin. Beauty and Skincare segment is in mature stage (Chapter 3: Life Stages (Part 3)) because of which the volume of gross margin is quite substantial.

This segmentation helps management to find out area which needs more improvement. Management can find out which segment is helping the company to compete in the market. E.g. Harley Davidson in its early stages to face competition from one its major competitor Indian Motorcycle introduced vehicle for mail delivery apart from its main product.

Divide and Rule is very old strategy which was used in wars but its useful today also that too in business.

Chapter 5: Shared Service

‘Sharing is caring’….that’s not the concept in corporate world. ‘Sharing is cost saving’ that’s the concept in corporate world which we will be discussing in this chapter. The whole idea and intent behind Shared service concept is to save cost.

Let’s take an example. Imagine a duplex bungalow where two families are living. They both have two separate kitchen with a cook working in each kitchen. Every kitchen has four major resources - Cook, Ingredients, Utensils and Fuel. Now if these two families combine their kitchen, they would get following benefits

• Single cook  with an assistant can work now to prepare food for both families
• Number of utensils required will be less 
• Ingredients required depends on quantity of food
• Fuel consumption would be reduced as entire food will be cooked at the same time

Because of all the above factors each family would now incur cost which would be lower than what they used to spend when their kitchens were separate.

This same concept is applied in corporate world. Let’s understand this with an example. Company A has three subsidiary, company B, C and D. Let’s consider an area of Accounts Payable (AP). Functions performed in AP is similar in every organization irrespective of nature of business of that organization. The primary role performed by AP team is to process invoices of vendors. Let’s say that the structure of AP team of all the above companies is as below:

Company	No of Team Leader	No of Team Member
A	1	6
B	1	4
C	1	3
D	1	3
Total	4	16

Now if the this organization want to set up a Shared Service unit for Accounts Payable team, one of the possible structure could be as below:

Company	No of Team Leader	No of Team Member
A	1	10
B
C
D
Total	1	10

As you can see from above two tables there were 4 team leaders and 16 team members before each company had their own AP team, but with shared service unit now the AP team has 1 team leader with team of 10 employees reporting to the leader. With this reduction in total headcount from 20 to 11 will definitely bring down the cost for entire organization.

Despite of the cost saving advantage there are some disadvantages also to this concept. Let’s revisit first example of two families with single kitchen. Earlier when the kitchens and cooks were different the food used to be prepared keeping in mind likes and dislikes of the each family, however now with the single kitchen and one cook the focus is more of preparing food for all the members of both family rather than likes and dislikes of anyone. Moreover since the food is prepared in large quantity there could be wastage if few members do eat it, which would lead to increase in cost.

Similar disadvantages will surface in corporate world also. In the above example of combined AP team, the focus of this new shared service unit would be entirely on just vendor payments because this is what they will be responsible for and their performance would be measured on this sole criteria. They won’t be concerned about cash flows and cash positions of individual companies. Since the AP team is working in isolation they won’t have visibility on the insights of the business of individual company hence at least one representative from each company will have to get involved with AP teams work which will unnecessarily increase the work load of that person.

One of the biggest issue in case of shared service is that of authority and responsibility. As explained earlier that the shared service unit does not have complete visibility of the business of individual company they would take inputs from a representative of individual company who would be responsible if anything goes wrong although that person does not have any authority. This representative does not have control over the team working in shared service unit. This representative would always be made a scapegoat.

Another concern is that of workload on shared service unit. As we can see in above example there are four companies having one common AP team. Now as the business of each of these individual companies grows the volume of work would also keep on growing which would increase workload on the AP team disrupting work life balance of employees working in this team. The way to reduce this workload balance is to increase the team size by recruiting more people in this team. However such support functions do not bring any revenue management would always refuse to bring in more people because this would lead to increase in cost without any increase in income. So management always prefers to put more burden on less employees rather than distributing this burden by increasing employee count.

The management thinker and inventor of The Vanguard Method, Professor John Seddon argues that shared service projects fail (and often end up costing more than they hoped to save) because they cause a disruption to the service flow by moving the work to a central location, creating waste in handoffs, rework and duplication, lengthening the time it takes to deliver a service and consequently creating failure demand (demand caused by a failure to do something or do something right for a customer)

Chapter 4: Resource Management System

An organization uses several resources to deliver its end product/service. Primarily all these resources can be categorized into following four category (Fig 4.1: Resources) - Employees, equipment, material and place from which business is carried out.

These resources will differ depending on business of the organization, for example if it’s a manufacturing company then the resources will be employees, machinery, plant, raw material, work in progress, etc. In case of a service provider resources will be employees, facility from where they provide service and equipment with which they provide service e.g. computer.

Proper management of all these resources from start to end is must for smooth functioning of business. There are several Enterprise Resource Management Systems available in market which provide one platform to manage all the resources of an organization. I am not going to do comparison of these systems in this chapter. We will be discussing whether an organization should implement a single system or different systems which are specifically designed for each function.

Answer is quite simple, there should be one single system for all the functions in the organization. Use of one single system removes chances of errors which could be there if multiple systems are implemented. Let’s take an example. In an IT organization employee is the most important resource as revenue generation depends on them only. So for this type of organization close monitoring of employee count, employee cost, revenue generated per employee becomes very necessary.

Now consider a scenario where there are two different systems, System A monitors employees details other than cost and System B which accounts for cost. These two systems are not connected to each other. Now if System B needs some inputs from System A then data will have to be extracted from system A and entered into system B manually. Whenever there is manual intervention chances of mistake is there. So if any mistake happens while entering data into system B then there will be difference between outputs of both systems. Then someone will have to reconcile these two outputs to do necessary rectification. And rectification is the most unproductive job as its just matching of two records, there is no useful output from it.

Nowadays it has become a trend in almost every organization to form a team, start a new project with some fancy name and output of such projects is usually some new system. This team working on a project will give a report stating that till now there was something wrong going on in the system and we can improve it by introducing a new system.

If there is any problem in the existing system then introducing a new system which will work in isolation is not the solution to the problem. Multiple systems working in isolation will only create multiple outputs which will lead to only confusion. Instead of introducing a new system it is always advisable to include additional features in the existing system so that it can serve the purpose.

An ERP should be developed in such a way that it will fulfill any and all requirements of the organization. From booking of a meeting room to procuring an assets, everything should be done through a single resource management system.