Linda Foster, Managing Director of business consultancy and accountancy startup, Numbers and Beyond, has provided us with a guest post about setting business strategy as a small business.
Just because your business is small (at the moment), it doesn’t mean that you should think and act small. I’m not suggesting that you rush out to find a smart new office with an impressive boardroom or set up branches across the globe. Rather, that you think like a large corporate in terms of setting your strategic direction, developing your business plans and monitoring your progress.
This may seem like a luxury that you can’t afford, especially as you’re running round trying to keep customers happy, your business afloat and creditors at bay. But that’s even more of a reason to take a step back and assess where your business is heading.
Having a clear strategy makes life easier. By providing a framework, it allows you to make decisions more quickly and with a consistent view. And, with your team on board, you will all be pulling in the same direction.
So how do you draw up a strategy? Well, it doesn’t have to be a long, painful and expensive process. You and the key members of your team know your business better than anyone, so an open discussion between yourselves is a good way to start. You may wish to invite a facilitator to challenge views and make sure that all ideas are brought to the table.
You are looking to set out what you want to achieve, why you want to achieve it and how you plan to achieve it. That sounds pretty straight forward, but it is important to make the strategy as clear and precise as you can. A good way to assess whether your strategy is clear is to consider it in the context of different scenarios or decisions.
For example, a business may come up with a strategy statement “to double turnover so that we are larger than competitor X and to achieve this by increasing our customer base”. Let’s test this out with some questions:
- Would they accept a contract that significantly increases revenue, but is loss making?
- What is the benefit of being larger than competitor X?
- What is the timescale for doubling revenue?
Depending on the answers, the strategy statement may be tightened up or changed.
It may be that a loss making contract is acceptable if it helps them to become the largest player in their regional market, opening up greater opportunity. So the strategy could be rewritten as follows: “to become the dominant player in the regional market as this delivers significant benefits in terms of bidding for contracts; to gain this position we will increase our sales force to grow revenue and we will actively seek to heighten awareness of our brand.”
Alternatively, a loss making contract may be unacceptable and competitor X is being used solely as a benchmark for growth. The business owners are interested in boosting profit to sell the business in three years’ time. So here, the strategy may be rewritten as follows: “to grow profit from £x to £y in three years to increase the sale value of the business; this will be achieved by growing profitable revenue and tight cost control with minimum investment for the longer term.”
So, unpicking the reasons behind the initial strategy statement has led to two very different business approaches.
Having established what you want to achieve, why you want to achieve it and how you plan to achieve it, the next stage is to draw up a three year plan. Look out for this in a future blog entry.
Linda Foster FCA, Managing Director of Numbers and Beyond
Linda Foster is a Chartered Accountant with more than twenty years’ experience of assisting businesses.
Having trained at Deloitte & Touche in London, Linda worked with a variety of clients, ranging from a family- run manufacturing business to a prestigious property developer.
Linda’s industry experience has been gained from four years at Gestetner (part of the Ricoh Group) and more than thirteen years in publishing, at The Economist Group. She was Finance Director, firstly for The Economist Intelligence Unit and then for The Economist Group UK and Economist Digital. These roles gave her the opportunity to develop and help implement the business strategy, work with newly formed businesses and new product launches.
Now Linda is using her wealth of commercial experience to assist small and medium sized businesses and start-ups. She recently founded Numbers and Beyond, an accountancy and business consulting practice.
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