Why is a business strategy so important for small businesses? Well, without one, the day-to-day operations have no guiding force. And ultimately, working without a clearly defined business strategy can become frustrating and meaningless. At the same time, a well-constructed strategy without executable tasks will never truly be accomplished. So, in other words, it’s imperative to align your broader strategy with the daily to-dos.
Unfortunately, per research, only about 8% of leaders are capable of achieving this alignment. So, let’s consider some benefits of a well-defined business strategy, and then we’ll talk about how to achieve that strategy-execution alignment.
Benefit #1: Defined goals
How can you measure the success of your business’ strategy? Well, the strategy should lead to a set of clearly outlined goals. In companies most prone to disruption or reduction in market share, almost 95% of the employees can’t name the strategy in place. That’s not a coincidence.
Benefit #2: Customer retention
Small businesses really need customer retention because it typically costs much more to acquire new customers than it does to retain existing ones. So, make sure you have a set strategy around customer service. This can involve some degree of social media or call center or email follow-up, parts of which may be automated. Without an actual strategy in place, though, customer follow-up tends to suffer, which reduces customer retention. Once customer retention begins to lag behind, company growth becomes much more challenging as a lot of money ends up being rerouted towards acquiring new customers.
Benefit #3: Resource allocation and expansion possibilities
The hallmark of a small business is that resources are tighter than they would be in an enterprise setting. As a result, one way to conceptualize the idea of a “strategy” is as a framework for resource allocation. For example: if your strategy involves a growth mindset, then resources dedicated to growth -- software programs, new sales reps, etc. -- can be prioritized over other resources because they fall more directly in line with the strategy. Decisions about where to spend money can feel nerve-wracking, but having a strategic focus can make these decisions a little bit easier.
Benefit #4: Forecasting and financial projections
Having an overall strategy also helps you with financial forecasting, which gives financial advisors and business executives something to measure actual financial data against. Forecasting can be fraught with inaccuracy; some companies are too aggressive while others are too conservative. But forecasts are an important benchmark that can help businesses better understand where they’re headed.
How do you align strategy and execution? Admittedly, it gets harder as you scale and have more people to keep in the loop. That’s why it’s important to establish the bedrock and benchmarks around how you communicate when you’re still a smaller business. Communication is the essential building block of strategic alignment.
While it’s nice to talk about companies letting everyone have a say in setting the overall strategy, that doesn’t usually happen. The strategy is usually set at higher levels (founders, etc.) and needs to be conveyed into executable elements down the chain. For example: your strategy might call for 300% customer growth in a given year. Great! But what does that look like day-to-day? Is there a team working on offers, discounts, email marketing, etc.? If so, that team needs to be aware of the overall strategy or the growth goal, and they need to understand how their daily actions support that goal. Additionally, keeping employees engaged can help reduce turnover, which benefits the company financially.
However, people get busy. Top executives may want to focus on the details to make sure they’re being executed. And business roles may become unclear. Oftentimes, no one is “owning” the strategy day-to-day. In those situations, it helps to bring in an outside partner, like AMOA Financial. With a trusted partner to “own” that aspect of the business, you know the strategy won’t be left behind in the dust when you need to put out fires or focus on other details. If your business is becoming overwhelming and crucial elements are falling by the wayside, that’s the exact moment outsourcing functionality to a trusted partner makes the most sense.