Business can be complex. In fact, there are around 30 different aspects to most businesses. Let’s look at ten aspects and examine, briefly, how we can effectively solve our business issues by simplifying down to three key elements for each aspect.
We have approached this in chronological order, but recognise readers will be at varying stages along their journey.
1. Startup
In order to sustain growth, every new business must have an:
a. Entrepreneur. This is someone with vision who can see opportunities or a different way of doing business.
b. Technician - someone who understands the technicalities of the business.
c. Manager - a strong person who will keep everything in check and ensure there are no excesses.
All these skills are necessary. You may find that one person has two of these skills. Rarely you find all three skills in one person.
2. Market position
Once you’ve decided what business you want to be in, then you need to choose where you want to play in the market. We can break it down into these three elements:
a. High end. Your offer is a product or service that is high priced and exclusive. A good example of this today is pearls. They keep increasing the price and the buyers keep buying more.
b. Commodity. This is a simple product or service that is sold at the lowest price
c. Specialist. Is your product or service a new idea that has not been around before?
3. Path to market
There are three key paths to market. There are subsets of these but let’s look at the main ones.
a. Sales people. We still need people talking to people, but they are expensive and need management, however you can maintain higher margins as you are dealing directly with the end user.
b. Partners. Partners or distribution channels can be Woolworths or Coles in retail and Blackwoods in the industrial sector. Here we sacrifice margin for volume.
c. Direct. We use the word “direct” as this is company to customer direct as opposed to company, via salesperson, to customer. Examples are ecommerce, social media, catalogues, telemarketing or letterbox drops.
4. Location
So, you’ve decided what business you want, how you will reach the market, and you have the right talents as founders. Now you need to decide where you will locate your enterprise.
a. Mall. You are looking for traffic, so in the modern day you need to be in a major mall
b. High street. Maybe you feel that you would prefer the high street. The cost will be lower than the mall.
c. Virtual. We are now in the digital age. We can be anywhere. The choice is yours.
5. Recruiting
You’ve been working long hours. Now it’s time to start looking for people to support you. This is the hardest job in any business. Finding the right people, keeping them engaged and letting them go when the time is right for both of you. The three key elements, employing people are:
a. Can do. Can they do the job? Their resume should have some clear signs.
b. Will do. Will they do the job. This may be difficult to assess when there are many things you cannot ask in an interview. But there are subtle ways that you can determine if the person applying for the job is motivated to get out of bed every morning and consistently come to work.
c. Fit. Culture eats strategy for breakfast. What is your culture? Will the new recruit fit into your culture?
6. Marketing
You may have been marketing already but it is always good to apply some discipline. To get the best results from your marketing you need to:
a. Create interest. Your message must be relevant and grab the reader.
b. Supply information. Now that you have their attention you need to give them some information that will keep them engaged.
c. Call to action. If you have kept them engaged, you now need to let them know what they need to do to - buy the product or service, contact you to learn more or discuss needs.
7. Funding
All businesses need money. You have decided how you will do this. Are you going to:
a. Bootstrap. Use your existing resources, such as savings etc., to fund your business until you break even.
b. Loan from a bank or institution. This will involve putting some security on the line. In most cases it’s the family home.
c. Equity. If you do not have a. or b. you will need to look at giving away a percentage of your business to get cash.
8. Reporting
On a monthly basis at least, some will say initially on a weekly cycle, so you know where your business is going, you need to establish disciplined reporting. Fortunately, you can rely on international accounting standards for our next three elements. You need:
a. Profit & Loss (P&L). While initially we all chase revenue, it’s critical that you know you are on target to make profits.
b. Balance sheet. This tells you what you really own or the value of your business.
c. Cash flow. Cash is always king. You have a great business, but your customers are using you as a bank.
9. Sales growth
You have come through the tough times. Your business is now more established. You now want to look at how to grow your sales. Sales growth is obtained by;
a. Selling more to existing customers. Your existing customers are best source of new business. They know you and you have a relationship with them.
b. Profile your database. Find similar customers to those you currently deal with. Understand their profile and find other who are the same or similar.
c. Sell to the wider market. After you have completed a. and b. you can begin to look at the wider market.
10. Market share
A methodology was developed by a Chicago based consultancy, called Frank Lynn & Associated. They called it, Product, Presence and Hit Rate (PPH®). Without going too deeply into this, it’s sufficient to understand this again is our three-point element to another aspect of your business.
a. Product. Look at your customer, look at the market and assess if you have a high percentage of products the market needs.
b. Presence. This is a follow on from No 3. Where we discussed paths to market. How do you increase your presence in the market?
c. Hit rate. How many sales do you close from your prospecting activity? 1, 5, 10 or 30%?
We’ve tried to give you a flavour of how you can approach your business and break all this complexity down to key business aspects. You can then deal with each by understanding the three key elements that need your attention. As mentioned at the beginning, there are 30, we have dealt with the first 10 here.
Get the breakdown of 20 more business aspects or
contact sharon@findaconsultant.com.au to connect with a consultant who specialises in helping small business owners.