Strategic management of your small business
As a small business owner, the things you want to accomplish with your business aren’t always written down. Advisors will say “you need a business plan”, bank managers will insist on one before approving that vital loan you need to finance your expansion. Whether or not you codify what you want for your business, you need to understand what strategic management is all about so that you can drive your business forward, ensuring that you can achieve/maintain a sustainable competitive advantage.
Strategic management in business boils down to 3 simple questions:
- Where are we now?
- Where we want to be?
- How are we going to get there?
Where are we now?
The first question looks at the situation the business is in, this situational analysis can take many forms, but as a general guide, think about doing SWOT and PEST analyzes of your current position. Don’t be scared by these acronyms, they are very easy to understand and can give you amazing information about your business and build your mindset. You could brainstorm with other members of your team, or with your family/friends if you are a lone wolf.
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal aspects of your business: What are you good at? What makes you better than your competitors? What are you not doing so well? Where could you improve? Opportunities and threats are generally external, so what opportunities are there in the market? Threats could come from new competitors entering your market.
Next, it’s vital that you look at the broader external environment, there are many acronyms for this type of analysis (STEP, PEST, STEEPLE, STEEPLED, to name a few), but they all pretty much amount to the same thing: political/legal. , Economic, Social and Technological Factors. I won’t go into too much detail on these as they are pretty self explanatory, for example the advent of the (Technological) Internet has had and continues to have a massive impact on the way businesses operate. Analyzing the broader environment can help you spot opportunities for growth or highlight the need for change.
Where we want to be?
So you’ve analyzed where you are now, the process itself will usually throw up some interesting suggestions, then you need to think about where you’d like to be. The answer to this question forms the basis of your strategic business objectives, they can be very varied and do not necessarily have to be focused only on billing. In a large organization, there will be corporate objectives that underpin the overall direction of the business, these are then cascaded through the different departments, each of which will have its own set of objectives, ensuring a coordinated and synchronous approach to driving progress. business wherever you want. be. In a small business, you may only have a handful of goals, but try to think outside the box here, as the saying goes, “billing is vanity, profit is sanity, cash is reality.” Don’t chase revenue increases for the sake of it, your underlying profitability is what really matters, and your goals need to be realistic and achievable (more on that below).
When setting your goals, it’s not enough to simply say, ‘To increase sales’ or some other cool statement, your goals should be SMART, another acronym, sorry, but useful nonetheless. Check that your objectives meet this criteria, they must be: specific, measurable, achievable, relevant and related to time. An example of the above vague goal made SMART could be: ‘Increase sales by 10% in the next 6 months’. These SMART goals ensure that you can measure the effectiveness of your strategy and tactics.
How do we get there?
You now know where you are now and where you want your business to be, but how are you going to get there? How will you achieve your goals? This is where strategy and tactics come in, your strategy is the broad overall plan, while tactics are the building blocks of what you will actually do to achieve your goals.
So there you have it, ask yourself: Where are we now? Where we want to be? How do we get there? These questions are the foundations of strategic management. Finally, don’t forget about the feedforward loop too, this is the point of creating SMART goals so you can measure if they have been achieved. Once you have carried out your plan, you should check how effective your chosen strategy and tactics have been by asking yourself: Are we there? Have we achieved our goals? If not, why not? These responses then feed into your next planning cycle and the process begins again, rinse and repeat…