1. Review Your Five-Year Plan
Periodically, as you move through your business, you should review your original plan and consider future plans when you wish to expand (discussed further in Chapter 13). As you review your plan and take account of where you’re headed, be prepared to identify changes, determine where you need to be flexible, where your potential areas for growth are, where your business as an industry is headed, and step it up wherever you need to.
1.1. Identifying Changes as Needed
The first of these is identifying your business changes. First, examine the industry as a whole, and then examine your consumers. Are you finding that they are moving toward a specific brand? Is yours no longer as trendy as it once was? Think about Nordstrom and the trouble it went through in the 1990s. It had to rethink its entire branding strategy by hiring new, more trendy buyers because it was becoming associated with boring, outdated clothing. Now a hipper, trendier Nordstrom is hitting new marks in profits and finding new, younger life-long buyers.
All industries will change; all consumers will change—it is simply a fact of life.
It is rare that an individual will stay brand-loyal throughout their entire lives. I think back to my teenage years, admittedly dating myself here, when Guess jeans were the hot item. I was unable to afford a pair but wanted them so badly that my best friend would give me her clothes when she was done with them, a year outdated and five or six sizes too big. I would wear them with safety pins all over the waistline because I wanted the brand—Guess. Today, though, I am not in search of Guess jeans; my age and income bracket hunts out True Religion and Antik Denim, for instance. If you are the company selling Guess jeans, you can either continue to market to new young people and figure out what they want, or you can look at it from the other side—how to keep those same junior high and high school kids from buying other brands, creating perhaps a more “grown up” line from the same brand.
Your business has to be flexible to sustain its growth! Just like the Nordstrom example, businesses must understand when need is changing or when their demographic is changing, and then maintain their flexibility to grow at the pace they wish to grow at.
In many cases, flexibility is easier when you are an online business. You can hire a web developer and, within a few weeks, transform how you do business, the portal your consumers go to for information, and the method that consumers use to purchase your product. If you check out the online store shopbop.com, you can see their brand-driven menu on the side. Why? One can guess (and as a frequent shopper there, I can speculate with accuracy) that the change to a brand-driven menu was due to the brand-conscious consumer.
This is an example of being very flexible and understanding what your customers want. At the core, of course, is what we discussed in Chapter 11—sampling your customers and knowing how to take feedback and use it to make positive change.
Flexibility, particularly if you have limited income, can also refer to your work and interactions with your team, suppliers, contractors, and employees. Often times small businesses don’t have the money to mandate to others how things will happen, so they offer flexibility in lieu of money to those who find it most important. Everything from your customer relationship management (CRM) software to your enterprise resource planning (ERP) tools to your management philosophies will need to be flexible enough to manage your business the way you want to.
1.3. Growth Potential
The key here is to identify growth threats and new areas of potential growth. One of the worst things that can happen to a small business is if one day a new entrant pops up into the market space you play in, offering a new type of product that could have been a great growth business for you!
So how do you identify growth potentials? First, be sure that you cast a broad net into the marketplace. Try to capture as much of the market as you can in your surveys, your consumer data-driven information, and your potential new customers. Next, determine if the new product or service has strategic value for your business. Will it help you grow in the long run? Will it help profits in the short run, but need to be transformed to adhere to new business endeavors in the long term? Then look at your existing offerings and what the “next phase” is for those offerings.
You want to look at all of the potentials of each area of growth:
- Lifetime value of that particular customer, product, or service
- The potential problem your new growth area can solve in the long run
- The change in demographic in the marketplace and in your market space
- What the media is covering and exposing, and patterns that you notice
- Sales potential for your new product or service (and profit potential, too, of course)
1.4. Stepping It Up When You Need To
When you determine there are untapped areas for growth, or as happens to me often, you think of something at 2 A.M. that you’d like to go for and give a whirl, a key to success is stepping up and trying it! During the 2008 presidential race,
I opened an online T-shirt company. Was it successful? Not by my profit requirements. Was it worth it? Yes, because it kept me from always wondering “what if’ later on down the road; a lesson I have had to learn numerous times the hard way.
When you think of something—a new source of revenue or a new avenue for your existing market, product, or consumer, go for it if the numbers make sense.
To do that, you may very well need capital. Often it is easier to raise capital for an existing business adding a new product or line than it is to raise capital for the opening of your new business. If you go to the bank you established your merchant account and/or business checking with, you may find it easier (assuming your company has a good credit and bank rating) to get money for your new ideas than for your initial business.
2. Knowing When You Are Off Course
A big risk to all entrepreneurs is not identifying—or not identifying fast enough— that they are veering off course when the macro environment isn’t going favorably in their direction.
One example of this occurrence would be if your business sells low efficiency air conditioners; chances are the market isn’t headed favorably in your direction. When you find consumer tastes and your product going in opposite directions, you need to identify it quickly, and either change direction or add product offerings more in line with the strategic moves and demographic (macro) changes in the market.
In addition to the changing of demographics, you could also find yourself directing your efforts toward a fading demographic—your target audience may be diminishing altogether. An example of this would be if your target demographic was customers who owned compressed natural gas (CNG) vehicles. If the government started mandating the phasing out of production of CNG vehicles, you would not want to wait until the last CNG car or truck drove off the assembly line to alter your business model. You would need to shift focus as soon as you got the word that your target demographic, and your profits, were jeopardized.
In Chapter 13 we go into further detail on business expansion and what to do when your buyers diminish, which will come into play before your business is in jeopardy, if you are doing your job of monitoring your business and market sector.
Yet another way to lose market share is when your products/services are simply no longer “the fad.” Many businesses experience great amounts of success providing popular products and services that are simply a phase for the general consumer base. Examples of this would be “pogs” (do you remember those?), the hula hoop (although it did make somewhat of a comeback), the pet rock, etc. Jumping on this bandwagon is a great move, should you be interested in it, but recognize the looming and ever-present downside—the fad will end. Tracking the life of these fads is imperative to being successful in riding the wave that they create. Waiting too long to get out could mean the difference between quick and easy money and ending up with a year’s worth of stock that you will never be able to see off for what you paid for it all.
3. Managing and Identifying Risks to the Business
As you move forward, you have to manage and identify any potential risks to your business and not just find new growth areas. You can find all the new growth areas possible and imaginable, but one risk that you hadn’t identified can take years of hard work away very quickly. The goal here is to avoid costly mistakes, particularly those that sacrifice any portion of your business, your profits, your customers’ loyalty to you, your brand identity or awareness, or your business model.
One of the risks that is often overlooked is the risk of disasters, and how to plan around them and for them. In information technology, we refer to both business continuity planning, or BCP, and disaster recovery planning, or DR. Disaster recovery deals with the process of recovering from a disaster, while business continuity planning helps the business stay functioning even if its continuity is broken. Both BCP and DR involve all areas of your business, and not just technology (though many large companies have had a hard time grasping this concept!). Something as simple as protecting your consumers’ data online or storing offsite backups can help you protect your company from disaster.
Other risks to you and your business include: breaking government rules or laws; breaking legislative rules or laws; stepping on another business’s trademarks, patents, or copyrights; improperly filing tax returns; hiring the wrong people; using a low cost supplier that has poor quality products; using a high cost supplier that has mediocre quality products; and so on. The list of potential risks is huge, but these are a few of the ones that carry enormously large repercussions.
One of the best ways to hedge against risks is to keep in contact (not to the point of annoyance, but enough to get information you need) with your customers— stay in touch wherever they stay in touch online, and keep in close enough contact with suppliers, business partners, contractors, and employees that you know what your customers are asking for and can identify trends before they identify your business—as a potential target for their competitive nature.
Source: Babb Danielle (2009), The Accidental Startup: How to Realize Your True Potential by Becoming Your Own Boss. Alpha.