Strategic Planning for Small Business: Thinking Big Even if You’re Small
I have worked with small business owners for a very long time. As a marketing agency, OCG Creative is approached every day by owners and managers looking for help meeting their growth objectives. Most often, they have something in mind. They’ll ask about building a website, utilizing social media, running print ads, or implementing more sophisticated tools like marketing automation, CRM or ERP. All of these tools are incredibly powerful, but must be focused on specific business goals. The purpose of this article is to provide tools to help you assess opportunities and better understand your competitive environment. Ultimately, the goal is to carve out a bigger share of your market—to help you to think and act like a much larger company.
How big is big?
The definition of “big” will vary depending on your perspective. For this purpose, we’ll define big based on market position, resources, perspective and operating practices. “Big” usually means market leaders in an industry or region. They not only dominate their market, but have ample resources to stay on top. The executive team is nimble and focused on growth strategies and market influences as much as daily operations. Management might be a team of two or twenty-two, so long as those criteria are met. In fact, all the requisite traits can be present in a single individual. Regardless of actual size, “big” companies have the brains and resources to continue to attract the most customers.
The difference between small business and big business
Smaller companies tend to share common characteristics. Almost always, the business was started by a passionate founder with mad skills and a sincere desire to be in the business he or she is in. Generally, that same individual works inside the business, performing all the duties required for daily operations. Focus is task oriented, and tactics are more about survival than growth and profits. There are many “lifestyle” business owners that wouldn’t have it any other way. But, for others, the “lifestyle” can evolve into a daily grind, which is not fun at all. It is possible to transform these kinds of companies. It begins with a shift in perspective.
Orienting your business for growth
Business leaders understand their first responsibility is to provide value to the company’s shareholders. Public or private, shareholders expect a profit from their investment in resources. If you own a small business, “shareholders” means YOU. Notice I said “resources” rather than invested capital? Resources certainly includes capital, but your greatest business resource is you. It is essential that you invest that resource wisely so that there is a handsome payoff for your primary shareholder. Treat your time like any other investment. Expect a profit, and invest differently if you aren’t seeing it.
Understanding market share
Any business or industry worth being in has competitors. It is natural to view competition in terms of “us versus them” yet what really matters is market size, growth and relative market share. Here are a few terms big businesses use to asses their competitive landscape. TAM: TAM stands for total available market. This represents the total demand for your product or service. The TAM is usually a very large segment. Imagine a product like canned peas and all the producers and consumers that have an interest or need for them. It’s a lot. TAM is useful for assessing service businesses as well. The important thing is to understand the industry you are in and where it’s headed. SAM: This is the serviceable available market. This is the subset of the TAM that is within reach of your business. Trade organizations, business journals, the government and even your local university can help you determine or assess the SAM for your particular business segment. SOM: Sometimes termed, “where we play,” this is the serviceable obtainable market. It is the subset of the SAM your company is equipped to pursue. Once you understand the unbiased scope of your market, you can asses your position in it. For most, this requires a shift in strategic thinking. Knowing the numbers, how big your market is, and what it’s made up of will provide clues about your best moves, given your available resources.
The truth about marketing
It is often said that 90% of marketing dollars are wasted. There are hundreds of reasons, but one common theme underlying failed marketing efforts is that they focus on the business rather than the consumer. It might sound harsh, but no one cares that you’re the number 1 dry cleaner for over 60 years. Dry cleaning customers care that their shirts are clean and starched just the way they like. They care that they don’t have to park a block away. They care that your kids play soccer together. Marketing must be about the consumer. Your message needs address their desire to make their lives better through your product or service. How you deliver that message depends on the business you are in. Social media might be a huge influencer, or not at all. Same for radio commercials, PPC, etc. Before investing in marketing, be certain a given channel will reach your intended market, and get the messaging right.
It’s time to formulate a plan, so grab your pencil and make two columns on a sheet of paper. Label the first, “What I know.” Label the other, “What I need to know.” Start with the TAM, SAM and SOM. Chances are you’ll need to do some research. If so, unanswered questions go in the “need to know” column. Do the same for anything you can think of that is important to your business. In particular, list the things your customers care about like where they hang out, demographics, etc. Include what you know and don’t know about your competitors also. Eventually, you’ll want make multiple lists that are specific to each aspect of your business. Commonly, these will include customer segments, competitors and market forces. Chances are, you’ll discover dozens of things you “need to know.” The next step is to do the research to find answers. That process alone will shed light on potential strategic moves that will make you a stronger competitor. Longer term, the information you gather here can be used to form the basis of a reliable blueprint for growth. The important thing is to get started.