As the year draws to a close, small business owners often start thinking about how their organization has grown or changed since the last time they replaced the calendar and started thinking about the holiday party. The march toward the end of a year encourages owners to not only consider the steps they’ve taken to success, but also the ones they have left to take in years to come. What comes next for any visionary business leader is to start planning how to take those steps starting today. Such strategic plans for a small business are rooted in answers to three primary
- Where is the business now?
- Where is the business going?
- How will it get there?
Along with those questions, a truly great strategic business plan will look at hard data that objectively establishes the business’s current position in the market, as well as marketing and other tactics to help it grow. Here’s a summary of the elements a small business owner should consider when making a strategic plan for a small to mid-sized business.
When 400 business owners were asked to participate in a study about success, they defined it not only as financial solubility, but also through intangible qualities like the ability to do the work they enjoy, flexible scheduling, and having a positive impact on their employees.1 Ultimately, success means something different to everyone. You have to articulate what you set out to accomplish before you can compare those aspirations to later outcomes. If you simply assume success looks the same for you as it does to your competitors, you’ll lose sight of what makes your business unique, and in turn, so will your customers.
To begin defining business success, refer to the organization’s key mission statement and values. Are the current business goal in line with the stated mission? Business owners and founders should also look at last year’s defined goals: Did you set out to grow sales in a certain area? Did you want to increase market penetration among a specific customer demographic? And did you “succeed” on your own terms? Some of these should be easy enough to simply check “yes” or “no” next to. However, there are some indicators of success that require more quantitative measurement to be fully understood.
When it comes to analyzing key performance indicators (KPIs) to evaluate business success, it’s important for owners to know that choosing the right KPI to focus on is a significant portion of the challenge at hand. The KPI Institute found in a 2015 study that 51% of professionals think choosing the right KPIs to track is the most difficult part of working with these numbers, with data collection coming in a distant second at less than 15%.2 At a small business of 80 employees, the relevant measurements to reflect success are unlikely the same as a large corporation, or even as a smaller-scale startup. Additionally, businesses must consider the most industry-relevant metrics for their attention. For instance, a law firm doesn’t need to keep an close eye on inventory turnover, but this is extremely important to manufacturing or distribution companies.
Two-thirds of senior managers can’t name their firms’ top goals.
If you’re not sure how to begin choosing between or calculating KPIs, there are many different professionals that are trained to help. The KPI Institute certifies trainees in helping businesses learn from KPIs, either generally or with specific focus in areas like business planning or performance management. Additionally, a business’ accountant or controller can give advice about which numbers are most essential to focus on understanding and improving. Consult with these experts, and even ask peers or mentors what numbers have shown them the clearest path.
Business is nothing without a strong and satisfied customer base. It makes sense, then, that when plotting out next year’s strategic plan you’ll want to pay close attention to understanding your audience and defining what success looks like as a face in the crowd.
There are key customer metrics strategists can benefit from tracking, like the Average Revenue Per User. This calculation demonstrates the average monthly revenue across all customers. By limiting this value to a specific time frame, you’ll be able to watch your customer base grow in real time.
This metric is similar to the Customer Lifetime Value, which measures and projects the value a single customer can potentially generate if they stay a loyal repeat client. The key to that is providing an experience, not just a product or service. A recent study showed that customer experience was considered the single most exciting marketing opportunity of 2017.3 Customers might make a big one-time purchase, but if they don’t receive the service or support they expect, they probably won’t make a second. Over 50% of participants in a recent survey said they ended business relationships because of poor customer service.4
Today’s customers are looking for a combination of speed, personality, and efficiency. Customers want to know that you care about them, but more importantly, they want to see their problems addressed without them having to take lots of steps. The Harvard Business Review found that reducing the effort a customer must expend to get service or a response grows their loyalty more than any other factor.5 There are many ways to achieve this outcome for customers, from a traditional phone follow-up to check their satisfaction to interacting with them on social media. A study showed that answering a complaint increases customer advocacy by 25%, which means you’ll have a better chance of not only retaining the original customer, but of encouraging them to spread the word to others.6
A recent study found that customer experience was the single most exciting marketing opportunity of 2017.7
Getting to know your customers through research, surveys, and focus groups is essential to any strategic plan. This insight means marketing initiatives or new service and product lines are developed based on actual customer information and feedback, not assumptions or simply out of force of habit.
If you’ve now taken time to identify and calculate your KPIs and customer metrics, you likely have a good idea of where you stand in comparison to last year. As you review the previous strategic plan, some of the questions will have clear yes/no answers: Did our number of customers increase? Did our profit margin go up? Did more consistent documentation take place? If the answer is no, the problem might not be your performance, but instead, because the goal wasn’t appropriate or being measured in the right way.
SMART goals ensure key benchmarks are established early, and that realistic-yet-challenging expectations are clear to everyone involved. A recent study showed that two-thirds of senior managers can’t name their firms’ top goals.8 During SMART goal setting, everyone involved can better understand not just the goals of the business, but what rationale informed the goals, and how achieving one supports the next. When building this ladder of intentions and starting to climb, business owners should consider the following characteristics to make sure each rung is solid:
- Specific: Are your goals well-defined? Broad generalizations like “increase sales” or “grow brand awareness” are hard to track. This could lead to not just a lack of direction, but also to a failure to meet the goal because the target was too broad.
- Measurable: Your goals should hopefully include numbers, like “12% increase in revenue” or “double our social media followers.” As a business climbs toward these goals, careful tracking will reveal if progress has stalled or slowed, and allow for adjustments to the approach.
- Attainable: It’s nice to shoot for the stars, but aiming at the impossible is another story. Work with your KPIs to estimate reasonable levels of growth and make sure you have a solid footing before taking a next step. At the same time, make sure to challenge the business’s potential, and revisit these numbers often to keep the goals changing as the business does.
- Relevant: Though you may want to double sales or open two new locations in the next year, a recent recession or pressure from competitors may mean your goals aren’t in proper alignment with the rest of your industry. Make sure to stay up-to-date on the state of your industry and the general economic climate to make sure you haven’t headed off-track.
- Time-Based: Don’t just set the goal to increase revenue by 12% by the end of the year, then hope all has gone well come Q4 of next year. Instead, figure out what concrete steps you’re going to take to increase revenue in the first quarter, set a timeline for each action, and track the outcomes through the weeks and months. As some steps show more results than others, keep adjusting your approach to make the most of the journey to the goal over time.
Strategic planning for a small business means considering how a lot of unknown factors might converge in the next year. By undertaking an honest self-assessment and measuring the right metrics, businesses can find the areas where they have control over those complex elements, as well as what strategies give them the most ability to increase that influence on the market. Listening closely to customers and interacting with them to resolve issues can only improve that understanding and give businesses an even greater edge.
As you plan to achieve success in the next fiscal year, make sure you’ve defined that term for yourself, and set the right goals to help you reach that stage ready to conquer the next one.