Running a small business is a daunting challenge. Statistically, less than 50 percent of small businesses are still operational after five years. Globalization has increased the level of competition and introduced more turmoil to the business environment.
If you want to take your business to the next level, you’ll need to be open to the current realities of the new global economy, and get more creative.
Here are five ways to keep your small business growing.
1. Build your foundation
An organization without a strong and stable foundation will surely crumble in the face of uncertainty and economic turmoil. The strongest foundations in business are those whose cornerstones are based on non-negotiable core values.
Core values are your deeply held beliefs and represent the fundamental forces that influence and drive the decisions you make on a daily basis. These guide the principles behind your purpose and vision and establish the culture within your organization.
An enterprise that is built on aligned values, purpose, and vision will remain true and committed to their ideals, regardless of changes in the business environment, because they understand their way of doing business.
This is called the “principle of right-fit.”
Tony Hsieh, CEO of online clothing retailer Zappos, has made company culture a focal point in his management style. Hsieh hires people not on the basis of their experience or expertise, but on whether they are a good fit with the company culture of Zappos.
When Zappos started, Hsieh used to think his entire business was coming to an end every single day; but he pursued his vision of building an organization strongly entrenched in aligned values. From a company worth $1.6 million in 1999, Zappos is now worth $1 billion.
2. Focus on flexibility of strategy
Flexibility in strategy helps the small business owner implement improvements when needed to accommodate changes in the industry. A business that has flexibility is better equipped to navigate through turbulence than one with rigid structures.
A good example would be businesses that integrate flexible work schedules for their workforce. These include the hiring of virtual assistants, which lowers operational costs while increasing the level of productivity.
A virtual assistant is an independent contractor or a freelancer who renders service online, usually from a remote location. The cost of hiring a virtual assistant is only a third of the cost of a full-time employee and generates greater productivity because of the payment structure, as virtual assistants have to accomplish predetermined milestones for payment to be released.
Quality of work also improves because people who become virtual assistants have previous experience working as full-time employees and have decided to focus on offering services that fall under their core competencies. So by hiring a virtual assistant you can increase the level of productivity without compromising your operational budget.
Business coach Tim Ferris documented the value of virtual assistants in his book, “The 4-Hour Workweek: Escape 9-to-5, Live Anywhere and Join the New Rich.” According to Ferris, he used to put in 14 hour workdays in his company, BrainQuicken. He was tired, stressed, and his level of productivity did not correspond with the amount of time he put in. Burnt out and spent, Ferris decided to go on a two-week vacation in Europe and delegated his work to a team of virtual assistants.
By implementing virtual assistants with a strict schedule in correspondence, Ferris was able to increase productivity, alleviate stress, and most importantly, enjoy life. Ferris eventually sold BrainQuicken and became a best-selling author, in-demand blogger, business consultant, motivator, and popular endorser.
Large corporations such as Oracle, American Express, and Bank of America have also recognized the value of incorporating virtual assistance services in their business development strategies.
3. Outsource services
Small businesses are characterized by limited access to capital and tight funding. Thus, efficient management of funding sources is highly important because small businesses have to fund both day-to-day operations and expansion projects. When a business is launched, activity begins to increase once it gains traction. The challenge for the business owner is to keep operations funded while also keeping the enterprise growing according to scale.
The most viable option for a small business owner is to outsource services. By outsourcing services, the small business owner can capitalize on comparative advantages in costs, particularly labor.
To put the cost advantage of outsourcing in perspective, the minimum wage rate here in Australia is AUD$ 15.96. If I wanted to outsource back office operations to the Philippines, the cost would range from 7 to twelve dollars per hour, and this includes salaries, benefits, power, internet, rent, and contingencies. By outsourcing, it is estimated that you can reduce cost of operations by at least 40 percent.
And it’s not just about cost savings. Outsourcing also improves productivity because it allows you to focus on your businesses’s core functions, that directly contribute to revenue generation.
In 2009, Mike Scanlin, owner of Born to Sell, an online investment program,outsourced programming work to Eastern Europe, and he estimates the move has saved him $500,000. Not only did his decision to outsource generate cost savings, but he did not compromise quality because the programmers had Master’s degrees in computer science.
4. Set goals to push boundaries
Why do you think competitive people generally perform better than non-competitive people? The difference can be found in the ability of competitive people to set goals for them to accomplish and become better.
When you set goals, you set the direction of where you want your business to go, and this carries over to the improvement in your level of focus, work attitude, dedication, and commitment. Goal setting improves confidence and motivates everyone to perform at their best because there is a united objective.
This is often referred to as “management by objectives,” or MBO, which was widely praised and utilized by Hewlett-Packard. At every level of HP, managers of every department had to identify objectives and integrate these with the company as a whole.
For small businesses, you must first have a clear understanding of what your business is all about. For example, you are running an eCommerce business that sells specialty toys. You should first define your target market and determine the strategies on how to reach them. Then identify the goals and distribute them to the various departments in your company.
Thus, if your goal is to sell x number of toys per month, discuss the production quota with your suppliers or manufacturers. The quota should accommodate the sales targets, and ensure that there are enough items in stock to cover unforeseen demand and any potential lag in production for the following month.
Then, provide your sales team with the target sales quota together with the appropriate sales incentives. As the small business owner, you must be able to coordinate the productivity of your various departments with your established goal as the central reference point.
Remember that when you set goals, these must be realistic and within the capabilities of your business and your people. There must be a basis when you set goals, historical or otherwise, and any adjustments in the targets must also be within reason. For example, it is not reasonable to set a goal of 50 percent increase in sales if the online toy industry has shown 25 percent contraction over the last two years, and the growth of your business has only shown 1.4 percent improvement.
5. Apply the law of comparative advantage
The formal definition of comparative advantage is a condition where one partner in a deal holds an absolute advantage in production, or a situation where the trading partner makes products faster, cheaper, and better.
In the mid-1990s, the Japanese took this concept one step further by integrating a key principle from “The Art of War” by Sun Tzu.
In the book, Sun Tzu states that during times of war, the spy is the most important position. Once a spy infiltrates your camp, your best strategies and defenses will be exposed and rendered useless. It became common then for companies to infiltrate the ranks of their competitors by sending their own people to apply for key, sensitive positions.
These “spies” are tasked to procure valuable information and uncover confidential plans and strategies which can then be used by their company.Companies such as Burger King and McDonald’s were known to have routinely engaged in comparative advantage.
There are many ways in which you can spy on your competitor without having to work for them. Here are a few options:
- Use available software programs. SpyFu researches all the keywords and AdWords used by your competitor. GoogleAlerts allows you to track what your competitors are up to.
- Talk to your customers.Your subscriber or market base provides an accessible resource because they always want to get the best value. They will tell you what your competition is doing.
- Hire your competition.Target those who used to work in sales or marketing, but be prepared to pay them well. Information sometimes cost a premium.
- Conduct research.Put together a research team that can conduct surveys through phone or email, and note key developments in pricing, product launch, and recent innovations.
- Call them up!You can hire a virtual assistant who can pose as a subscriber or potential customer, and ask as many key questions as possible.
- Go though social network.There is great probability your competition has put up its own social media pages. Follow or like their pages; you can note plenty of key strategic information based on what they post.
If you want to keep your small business growing, you have to be creative and innovative in your methods.
Digital technology has made this possible, but the biggest advantage of small business lies in its ability to become more mobile and flexible due to its lack of size, structure, and processes—qualities which the large corporations do not have.