It’s easy to make mistakes in business. While big businesses may have the capital cushion to absorb most errors, small businesses don’t, and a mistake can finish a business before it’s managed to get off the ground. While overlooking a couple of figures in the ledger may be expensive, a strategy mistake can be fatal. So here are five pitfalls to avoid when you’re developing your small business strategy.
#1 – Marketing is NOT strategy
This is one of the biggest mistakes that new businessmen and women make. It may be intuitive to think of marketing as a big part of your strategy, but in fact it is merely a means to an end. A marketing-only strategy overlooks the fundamental points of a business strategy, such as projected growth, product development and other value-based considerations. Yes, marketing is crucial (after all, if people don’t know you’re there, they won’t buy your product!) but don’t let it become the all-consuming factor in your overall strategy. It’s a part, not the whole, so keep it in its place. This approach also prevents marketing expenses from escalating.
#2 – Size matters – be the biggest, be the best!
A common belief is that the bigger your company is, the more profitable it is. While there may be a small amount of truth behind that theory, it shouldn’t be the be-all and end-all of your business strategy. With greater growth comes greater expense, and just because a goal sounds good does not necessarily mean that it will be financially good for the company. A good fiscal balance is essential, so steady growth that’s sustainable and doesn’t put a strain on existing resources is more likely to succeed in the long term than rapid expansion and an attempt at market domination.
#3 – Growth is not a strategy
Following on from #2, let’s reiterate that growth in itself is not a ‘business strategy’ – it’s an aim or goal, yes, but not a strategy! The strategy part is how you achieve that growth, and again to ensure that it is sustainable. Don’t confuse strategy with actions. Strategy is your causation, and growth (if you do it right!) is your effect. The actions you take to achieve growth are part of your strategy.
#4 – Do ‘What you’re good at’ – your competitive advantage
It’s very easy to overestimate your business’s strengths and therefore skew your overall strategy because of the inclusion of incorrect or inaccurate data. Yes, you may be good at making product A, but if your customers want product B then making too much of product A is obviously the wrong strategy. Be realistic about your strengths and advantages, and remember that an advantage is often something more visceral, such as providing a better standard of customer care than your rivals. This gives you a competitive edge in that particular area of the strategy, but it also demonstrates that there may be other parts of the plan that need to be addressed for the overall strategy to work, such as making more of product B!
#5 – High growth markets are where the money is
High growth industries may look attractive on paper, but for small businesses it can be a case of reaching too high, too fast. Growth is also no guarantee that a business will be profitable, and may over-stretch a business’s resources and finances. It could also put your suppliers in control, rather than you. Nobody ever got wealthy chasing after a fast buck, and rapid growth is often followed by extremely rapid decline, especially if you can’t pay your suppliers and they end up cutting you off. Again, the key is sustainability, so ensure that your strategy revolves around the long-term, rather than short-term rapid gains.
Author Carlo Pandian is a management graduate and blogs about finance, small business and technology. He also writes tutorials on Intuit small business accounting software and loves sharing tips for entrepreneurs about how they can boost their businesses.