Strategy is the art of how you win in business. If you haven’t figured out how to win in business, then there is a very good chance that you are on the slippery slope and burning cash.
Generally small to medium sized family businessmen and women work hard in their businesses and think that is the answer, but working hard is not enough.
You have to work smart, think expansively, connect with the right people, spot fresh opportunities and find a competitive advantage.
I have a client who is an electronics genius. He gets to work at four every morning when it’s quiet and there are no interruptions and sets to work inventing new electronic components for his machinery.
By doing this he ensures that his products are ahead of the market. He has a wide network of contacts and reads expansively about the latest and greatest in electronics.
His competitive advantage is in his ability to stay ahead of the market by regularly inventing clever electronics for his products.
Another client, who has a manufacturing plant in the western suburbs of Sydney, gives his customers personalized service. His business is big enough to employ a customer service person, but he choses to do this job himself.
He has a personal relationship with his clients, and often finds ways of making delivery times that are the envy of the industry. His personal relationship with his clients and his service are his competitive advantages.
The question that every small business owner must ask themselves is: “What is my unique competitive advantage-what sets me apart from the competition and why should customers buy from me?”
When you can answer these questions, you have the basis for your strategy. If you are having trouble establishing a unique competitive advantage then get some help from a professional.
Once you have your strategy sorted, then its time to set your Budget and goals for 2013.If you are having problems with your budget, then get some help from your accountant.
They mainly ensure that you comply with the tax law, however they can also help you in this important aspect.
Goals on the other hand are something that you should set yourself.
“Goals are the fuel in the furnace of achievement” says Brian Tracey in his book “Eat that frog”. Firstly set your annual budget and then set out the things you need to do to achieve your budget. These are your goals. They include specifics like:
• How many new customers.
• Average sale to each customer.
• Number of products to be sold.
• Stock levels.
• Delivery times.
• Improvement in service.
• The average price.
Then specify in a great detail, what you need to do to achieve those goals. What is the plan, month by month? In the absence of clearly defined monthly, weekly and daily goals your business is just drifting, being pushed around like a cork in the ocean.
Another client has just reviewed his annual goals and at the first management meeting of the year changed his focus. His long term aim is to double the size of his business.
This has resulted in expansion of his plant, and the employment of additional staff to expand his market presence.
He has also taken an opportunity to make a purchase of a significant capital asset which has been funded internally without borrowing. The result is a tightening of his cash position.
As a result the immediate focus for the next six months is to ensure that the business generates sufficient cash to maintain the business without adding to borrowings.
Each staff member has refined their annual goals to focus on a strong cash position. So in addition to the original goals of the business, these are added:
• Stock to be reduced by 10%.
• Debtors are to be reduced by $50,000.
• Cash sales to be increased by 10%.
• Payment to creditors to be extended where possible, saving $10,000.
• Productivity to be increased by 3% to save overtime payments.
• Focus in the business to improve quality is to be maintained, reducing quality faults by one per cent per month.
This focus will be formally reviewed at the monthly management meeting, at the weekly performance meeting and at the daily service meeting.
In other words, the focus will be relentless, making marginal changes in the business daily to ensure that the goal is achieved.
So my seven steps to making a profit in 2013 are as follows:
1/ Review your strategy. Figure out why customers will want to buy from you and not your competitors. Make sure the unique competitive advantage is real and not imaginary.
2/ Establish your budget for the next 12 months. Get some help from your accountant if you can’t do this alone.
3/ Set your monthly, weekly and daily goals. This is your task. Think long and hard about these and quantify them.
4/ Align everything that you do and everything that your staff does, with your strategy and goals.
5/ Take action daily on your goals, maintaining commitment.
6/ Review progress regularly and change course when necessary.
7/ Focus, refocus and then refocus again and never give up.
Lee Iacocca an inspirational American business leader said this about using your time well: “The ability to concentrate and to use your time well is everything if you want to succeed in business-or almost anywhere else for that matter.”
David Ley is a director with Thexton Armstrong Ley. He can be contracted at david.ley@thextonarmstrong.com.au
