Congratulations! Your startup has beaten the odds and survived as an established small business. But you’re not done yet. Now it’s time to capitalize on your wins and look toward growth.
Is your small business prepared to succeed at the next level?
To increase sales, revenue and profit, you’ll need to have certain elements in place. This checklist spells out 10 actions that can help ensure your business has what it takes.
#1: Know your cash flow
“People say cash is king, and it’s true,” said Tameka Montgomery, associate administrator for the U.S. Small Business Administration’s Office of Entrepreneurial Development. “But, sometimes business owners think if they’re making sales, then all is well. Yet you can be making sales and not have cash flow.”
Maintaining positive cash flow means having an understanding of how to manage your business by the numbers, Montgomery noted.
Tim Berry, author of “Lean Business Planning” and founder and chairman of business planning software company Palo Alto Software, said it’s especially important to watch your cash flow when sales are booming.
“A sudden growth spurt can suck up cash flow so much that it’s a kick in the stomach and suddenly you can’t breathe,” said Berry. “Our sales doubled over a nine-month period and it nearly killed the company.” Why? Because of the lag between spending to build the product and getting paid.
- Create a cash flow projection that looks a year ahead, or six months at a minimum, so you can anticipate problems in time to act.
- Watch your financials weekly. Many business owners look at their financial statements monthly or even quarterly, but Montgomery advised analyzing them at least weekly to ensure you’re generating enough cash to cover expenses.
- Look for ways to get paid by customers faster (such as discounts for quick payments) and to extend creditor payment terms to improve cash flow.
#2: Stand out from the crowd
Have you clearly differentiated yourself from the competition? What do you offer that they don’t?
Having “a unique value proposition that customers want” is number one on small-business CPA Randy Tarpey’s list of must-haves to be positioned for growth.
Montgomery agreed that having a clear understanding of your unique value proposition is critical.
“In business, there’s a lot of people who sell similar things. You think about hamburgers — there’s McDonald’s, Burger King, Smashburger, Five Guys. . . but what makes them sustainable over the long term is that they understand who their target customer is, they understand what their unique value is and they market it to their customer.
- Create a unique value proposition (UVP). Know how your product or service is distinct, and distinctly better than, what the completion offers, and put it in writing as part of your business plan. What specific consumer need or desire does it fill that your competitors’ products or services don’t? If you’re not sure, asking your customers why they patronize your business can help.
- Don’t confuse price and value. According to SCORE, a nonprofit association dedicated to helping small businesses succeed, price alone is not usually a strong differentiator.
- Convey your UVP to your customers at every turn – in your advertising, on social media, in your newsletter, on your website, in your store.
#3: Build a growth plan
Your business plan helped you launch. Now, unless you want to stay small, you need a plan to help you grow. The goal of the strategic growth plan, said Montgomery, is to help you identify new opportunities.
“It helps an owner determine how she is going to grow and the steps necessary to make it happen,” said Montgomery. For example, will you grow by increasing your market penetration (selling more products/services to your existing market) or by developing new markets, whether regionally, nationally or globally? Or will you develop new lines of services or products?
“A strategic growth plan challenges you to consider what’s right, where the best opportunities exist and what resources are needed to get there,” said Montgomery.
- Know your key performance indicators. These can help you evaluate your growth potential. KPIs may include revenue, total average revenue per customer, percentage of leads converted, the cost to add a new customer, etc.
- Use market research to drive any decision regarding market penetration, new products or markets.
- Start with the easiest growth strategy first. Finding ways to sell more of your existing product to your existing market is generally considered the least risky strategy.
- Consider selling your product or service online if you’re not doing so already, or through another alternative selling channel.
- Master inventory management. Having the right amount of inventory is key to managing cash flow and controlling costs. Inventory management software can help.
#4: Make sure you have the capital you need
It takes money to make money, and often, it takes more money to make more money. “Depending on your growth strategy, it could mean you need to go out and seek financing,” said Montgomery.
Berry noted that of the four major growth strategies, bringing a new product to new markets is by far the most capital intensive. Selling more of the same thing to the same people is the least capital intensive. Selling a new product to existing customers and selling an existing product to new customers fall somewhere in the middle, he said.
- Lay out incremental sales and spending in detail to understand the impact of your growth strategy on your operating cash flow, and therefore your funding needs, Berry advised.
- Look to an independent local bank or credit union that practices relationship banking if you need a loan.
- Consider an SBA loan. If you have trouble getting a small business loan from a bank, a local Small Business Administration (SBA) lender may be able to help. The SBA doesn’t provide direct loans but sets guidelines for loans made by its lending partners (including banks) and guarantees a portion of the loan will be repaid, which eliminates some of the risk to the lender.
#5: Know your customers — very well
According to many small business consultants, success or failure can hinge on how well you know your customers and how carefully you listen to their needs.
“It’s critical to be able to understand exactly what roles people ‘hire’ your product or service to do for them,” said Dave Coustan, founder of marketing strategy consultancy Extraface.
Berry explained that business owners tend to get lost in the details of day-to-day management while the marketplace continues to change. Losing touch with what the market really cares about, he said, is a danger, particularly if you’re looking to grow.
- Talk to 10 to 20 customers directly. “Simply talking to 10 to 20 recently acquired customers and/or some who have recently switched away through a structured interview can unearth some of [the] key insights [you need],” said Coustan. Barry suggested talking to 5 or 10 of your favorite customers at least twice a year.
- See what people are saying on social media. “Rather than focusing on brand mentions, a business owner could focus more broadly on conversations relating to the topic area, category or behavior field in which their product or service sits,” said Coustan. “Often by looking at a significant amount of public conversation and exploring the language people use, their related affinities and the facets of the problem area most important to them, you can get pretty far.” Coustan suggested using each social media platform’s own analytics tools or a free third party tool such as Social Mention, or inexpensive SAAS (Software as Service) tools such as Buzzsumo and Union Metrics.
#6: Test the market for new products or services
If you’re hoping to expand by branching into new product or service lines, look (at the market) before you leap.
“Test the market with any new product or service idea before you put all your eggs in this one basket,” advised Gabriel Kuperman, founder and CEO of marketing firm Huge Impact. “Sometimes new startups spend too much time, money and resources before they finally test out their idea and realize that it’s not going to go anywhere.”
Talking to your existing customers can also give you feedback on new products or services you’re considering.
- Consider hiring a company to run a focus group for you. SCORE explains that while this costs money, it can save you time, money and aggravation later on.
- Get free samples into the hands of potential customers. In exchange, ask them to complete a brief questionnaire, advises SCORE.
- Attend a fair or expo. If you’re looking to market a new product, bring a small quantity to gauge reaction.
#7: Line up your dream team
“You can’t grow if the owner is doing every single thing. You’re going to burn yourself out,” said Montgomery.
“A business is primed for growth when you have a strong team and those team members understand the role that they play.” The goal, she said, is to be the manager, not the technician. Spend your time on what you do best — and what is going to drive revenue — and save the rest for someone else.
- Attract the right applicants. Make sure your job ad presents a clear description of the duties involved and also the attributes you’re seeking in a candidate. If you have a great company culture (more on this in #8), don’t hesitate to tout it.
- Spend money on salaries. Today’s employees value respect, recognition and opportunities for advancement — but they’ll look elsewhere for a job if they’re not being paid enough. Do your homework to find out what other, similar companies are paying.
- Know when to hire for personality vs. skill. The labor market is tight, and it could be hard to find exactly the person you need. If a skill can be easily taught, consider hiring for personality (especially if the employee will work with customers) and attitude. A hard-working team player can be worth his or her weight in gold, especially on a small staff.
- Set goals and provide training. Employees who receive training are more productive and also less likely to leave. The training can be formal or informal. Also consider pairing newer or younger staff members with a mentor.
#8: Create an engaging culture
According to Deloitte’s Global Human Capital Trends 2016 report., based on more than 7,000 responses to a global survey, culture has become one of the most important business topics of 2016. The report noted that culture, which it defined as “the system of values, beliefs, and behaviors that shape how real work gets done within an organization,” is one of the factors that contribute most to business success.
“What’s unique about a small business is that it’s much easier to impact change and create a culture,” said Montgomery. “That’s a great opportunity small businesses have — to create a culture that really engages your staff and one your clients can really get behind and be engaged in.”
An appealing corporate culture is becoming essential in attracting and maintaining top talent. In Deloitte’s survey, 86 percent of respondents rated culture as “important” or “very important.”
- Work hard to convey your vision. If your employees understand where you want to take the company, why, and how, they’ll feel more invested in the outcome and work harder to help make it happen.
- In addition to respect and recognition, offer perks. These could be as small as free yogurt and fruit in the break room or as significant as flexible work schedules.
- Offer good benefits. According to Aflac’s 2016 Small Business Happiness Report, 22 percent of respondents said benefits offerings are one thing they like least about working for a small business, and 65 percent indicated an improvement in their benefits offerings would make them a happier employee. Respondents noted that among the most impactful changes an employer can make to improve current benefits offerings are contributing more toward price, presenting a broader range of offerings and presenting different types of offerings.
- Treat customers right. Berry said, “How many businesses say ‘we care about the customers’ and when the phone rings and there’s a problem, they really don’t? You can’t just say it, you have to live it.”
#9: Be flexible — and ready for change
Sure, you need to have a vision and a path to success. But as Darwin noted, it’s not the strongest who survive but those who most successfully adapt to their environment.
“Be flexible and honest enough to change direction if something isn't working,” advised Nancy A. Shenker, CEO of the ONswitch marketing firm.
Dan Sondhelm, growth strategist and CEO of Sondhelm Partners, a strategic financial communications company, gave similar advice. “Have a business plan, but be flexible — your best opportunities may not be planned.”
A plan is useless, noted Barry, if you “just write it and forget about it. What we need is steering, and steering involves constant correction, even on a straight freeway in the Midwest.”
- Hold management meetings at least monthly to check progress toward goals and change course as needed, Berry advised. “Get the people who are supposed to execute the plan together for just an hour or two. Even if it's just you, set the time aside.”
- Know what’s working and what’s not. “Set up a tight system of metrics and tracking based on the key measures that will ensure success — for example, leads, sales, customer satisfaction, costs, etc.,” said Shenker.
- Keep a close eye on trends and customer feedback. “Make sure that someone is held responsible for trend tracking, customer research and review monitoring (e.g. Yelp, direct feedback, online chat conversations) and competitive activity so that the business is always maintaining an outward-looking and data-driven culture,” advised Shenker.
#10: Find a mentor
“In sports, you have people who are the top athletes in their field, they’re great at it, and they have coaches who are coaching and guiding them on how to do better and how to avoid mistakes. It’s no different in business,” said Montgomery. “You can use the wisdom and insight of someone who’s done it more successfully than you have.”
“As entrepreneurs we have to be learners, and if we think we know everything, that will be our downfall in the end.”
- Ask people you admire. Identify someone who has wisdom and experience in an area you need help with and ask if they’ll mentor you. If they say no, they will at least be flattered and might refer you to someone else.
- Network with investors. They’re plugged in and know who has done what in your industry.
- Look to the Small Business Administration. It has programs and resource partners that support entrepreneurial training and education, including SCORE, Small Business Development Centers, Women's Business Centers and ScaleUp.
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