Small Business Survival Kit 2020
As our business interactions grow in both complexity and velocity in 2020, every responsible entrepreneur should try to get ahead of the curve. A great way to do this is to prepare a “small business survival kit” to help you succeed. This effort essentially needs to combine a proper goal-driven mindset, a clear development strategy and various enterprise-enhancing tools and skills which will ensure your business not only lives through the day, but thrives for decades to come.
Now, some small business owners will claim that they know all there is to know about their business, and it would be hard to argue against that. Their passion and their ability to identify a market need is what drove them to become entrepreneurs in the first place, but as times inevitably change, so do the customer preferences and market trends. Recognizing this and adapting accordingly is key to growing a successful business. In addition, you will need to pioneer new approaches to how and where value is created for existing and future customers.
Since we’ve established our entrepreneurial objectives, let’s move on to the most important things a small business owner needs to know and how they can be harnessed to create results.
The enduring importance of small business
You’ve surely heard about the pivotal role that small businesses play in every country, but the scale and gravity of this impact are not always fully elaborated. US Small Business Administration offers a great perspective on this – there were 30.7 million small businesses in the US in 2019, constituting a staggering 99.9% of all enterprises in the States. These companies employ close to 60 million people, which translates to 47.3% of the total workforce.
By their very nature and origin, small businesses are extremely close to the market, they have direct interactions with their customers and create value in places which matter to us the most – our own neighborhoods. These companies also drive innovation, but not in the same way that giants like Apple do. According to Forbes:
“Successful innovation for the small business owner takes the ability to focus, critically evaluate your own company and the aptitude to work at grassroots.”
This means that small businesses are at their strongest when they use their proximity to our everyday lives to help us solve real problems and satisfy important needs. Furthermore, these types of companies provide their founders with the opportunity to live the lifestyles they’ve always dreamed of, to take risks and reap the rewards while creating tangible value in the process.
The struggles of small business owners
In spite of their proven impact, small businesses can also be the most vulnerable. Their local nature limits their attractiveness and strategic importance in times of economic turmoil. Not only that, but they are unable to leverage the financial safety-nets available to huge systems like banks or car manufacturers. This means that they are likely to go under quickly if their competitiveness falters or if they fail to deliver on their promises.
On top of that, most business schools today churn out graduates who are trained to work for someone else, not for themselves. Teaching someone entrepreneurship is complicated, as there is no single recipe for success. This is further impacted by industry trends, the geography and demographics of the business’ serviceable area and the decision-making skills of the entrepreneur, among others. Nowadays many people will just throw buzzwords around and promise silver bullet solutions that will make your business soar overnight. Make no mistake – this is simply not true. There is no single tool or skill that will give you these results, and the facts speak to that.
There are millions of new businesses emerging in the US every year but only 50% of these businesses make it past their fifth year.
42% of small businesses fail because there’s no market need for their services or products.
29% failed because they ran out of cash.
23% failed because they didn’t have the right team running the business.
19% were outcompeted.
18% failed because of pricing and cost issues.
The full list can be seen here.
As we move down the list we can see that only 14% of those questioned stated that they “failed because they ignored their customers”. Additionally, many entrepreneurs get caught up in their own inspirational dreamworlds. They rely mostly on wishful thinking, startup myths and idealization of their company goals. They should instead be focusing on proper guidance, market research and fact-based planning.
This doesn’t mean that we’re neglecting the most common small business problem- cash flow. What’s important to understand, however, is that cash flow issues can be overcome, and are for the most part a short-term problem. However, if a business finds itself constantly strapped for cash, this usually points to a bigger underlying deficiency – an inability to create sufficient value at a given cost level.
At the end of the day, the entrepreneur’s ability to recognize the problem is the first step towards creating a viable strategy which brings sustainable value that will guarantee you more and more business.
Preparing for success
We have already mentioned that there is no silver bullet solution and no one tool to make your business succeed. Instead, there’s a combination of factors that all contribute to your ability to better interpret the market signals, learn more about your clients and understand the exact value proposition that customers are looking for. Some of these tools are quite practical and rather prominent – chances are you’ll be using them on a daily basis. They range from shared cloud storage and finance and payment apps to survey generators, followed by communication apps, e-shop solutions, video and social media content widgets.
On the other hand, some other tools are more abstract in nature. They are methodologies and various process designs which you can employ to better structure your organization’s internal mechanisms and achieve greater sustainability. It may sound counterintuitive, but these intangible tools will provide more benefits in the long run, as they will help you build a strong foundation from which to grow your enterprise. Let’s dive in and see what every small business owner should do to ensure their business survives and thrives.
Define your objectives and key results
Every successful organization starts with formulating its main objective. The next step is to develop the best possible methodology to achieve this objective, while taking into consideration all of the enabling and limiting factors that the organization has at its disposal. This requires a holistic view of the market challenge which lies ahead and greatly depends on the ability of the company’s decision-makers to accurately identify future milestones and goals.
These objectives need to be easily measurable in order for us to understand if we’re headed in the right direction, or if we should consider a course correction. This is where the key results come in, and this combination is what Intel CEO Andy Grove named OKR – Objectives and Key Results. The principle behind this effective approach is to define where you want to go and what you want to achieve in each part of your business flow.
When it comes to key results, keep in mind that you need to break it down to the pure essentials and see what really makes your business work. You can always use successful examples from your environment, but make sure you compare apples to apples. Try to look for the so-called “identical twin” – a company whose profile very closely matches yours – and see what they’re doing well, what could be further improved and how that can translate to your enterprise. Many people have trouble defining the proper key results because there’s simply too much noise in their business environment. It is common for entrepreneurs to view every single aspect of their business as relevant and necessary. In this case, taking a step back and using a fresh pair of eyes (preferably your customers’) could go a long way in helping you choose which key results you want to pursue.
When setting your OKRs, you need to be aspirational regarding the desired results, but remain realistic when assessing your means of achieving them. The metrics behind OKRs are relatively easy to follow. If you discover that you’re constantly outperforming (i.e. scoring 90% or more), it might be time to reevaluate your goals and try to push yourself harder. Conversely, if you are significantly missing the mark, it might be wise to reassess the feasibility of what you’re trying to do, and make sure you are deploying your resources properly. As a rule, small businesses do not have cash to burn and can’t allow people to waste their efforts on things that fail to create value.
Formulate and refine your value proposition
As the business environment changes, your ability to adapt becomes key. Gone are the days where just having a great product was enough to create lasting success. The competition is intensifying and there are numerous competing products and services entering the market by the minute. A product with a lot of functions and features is certainly a neat thing when you look at it from the perspective of what the human mind can design and build, but overstuffing it with actionable content doesn’t guarantee customer interest. This is a common problem for small businesses run by engineers – they tend to focus on the product’s features, while neglecting the first thing any successful entrepreneur should ask themselves:
Does this solve a clear and real market need, and would someone pay for this?
From this, we arrive at the concept of unique value proposition.
The unique value proposition triangle is built on 3 pillars – who are your customers, what is the need you are aiming to satisfy, and at what relative price. All of this can be discovered by spending time with the people you plan to serve through your business. If you’re developing a new product, the perfect way to pinpoint which features would be considered valuable is to integrate the desires of your clients while designing and building the product, and get early customer feedback from testing as soon as possible.
It might sound obvious, but the best way to understand what your future customers would be willing to pay for is to talk to them directly. Remember: there is no such thing as starting communication with your users too early. It’s true that many people fear that someone will “steal their idea” if they discuss it openly, but this is unfounded. If you’ve managed to identify an unmet need and a market problem that needs to be solved, chances are that someone else is already hard at work on providing a solution. This is the nature of competition, but we should be able to learn from it, not fear it. Information plays a crucial role here, which means only one thing: you need to seek the most up-to-date information possible from your customers, and constantly tweak your offer to suit their needs.
Furthermore, make sure you constantly invest time into thinking not only how to satisfy your current customer base, but how to expand. The best type of growth complements and plays to your brand’s existing strengths. Try to find new sources of value, deploy additional services that your customers would appreciate and strive to make your efforts appear seamless and organic.
Understand the evolving digital environment
A couple of years back, search engine optimization was considered the be-all and end-all when it came to what a small business should do to become visible and remain relevant in the ever-expanding digital information marketplace. Luckily for some, this has changed to a certain extent, but this does not mean that you can neglect your website, online presence and SEO. Being present online is a definitive necessity. People love having instant access to information and the internet is currently the best possible way of getting it. Even the more traditional customers are incorporating digital habits into their everyday routines - using the web to find businesses, products and services nearby.
- 90% have used the web to find a local business in the last year
- 33% search for local businesses online each day
- 52% of 18-54-year-olds constantly read online reviews
- Only 53% of people are prepared to use a business with less than 4 stars
However, simply bringing a potential customer to your website, blog, social media page or shop is not enough to generate a sale. People come looking for information, but they stay because of the promise of value that they receive from what they see on your digital profile. They will return only if your business manages to deliver that same value it had initially promised. When it comes to your online visibility and customer interaction with your content, there are three major things you have to address.
Consistency refers to publishing information on a regular basis – it could be weekly blog posts on a fresh topic, promotions and sales, stories and testimonials of satisfied clients, you name it. Hitting the sweet spot here is key – you don’t want to oversaturate the ether, but you also don’t want to keep your base waiting too long on new content and allow yourself to fall into obscurity.
Regarding quality, you must ensure that your actions are relevant in terms of the information they contain, pleasantly designed and aesthetically interesting, and most of all accurate. Accurate information is the essence of value. Nobody is going to appreciate a scenario where they think they’ve found what they need on your website, only to be unpleasantly surprised when they visit your store a couple of minutes later and find that the item isn’t actually in stock. Likewise, nobody is going to bother browsing your website if it’s not adequately structured and clear, searchable and responsive.
Put simply, intuitiveness means that your digital map is clear and tidy, and your customer interaction has to be seamless. Intuitiveness hinges on a website’s visual design to a large extent, but it draws its strength primarily from the way the information on that website is structured and navigated. This also allows for easier funnelling of customers from the second they land on your page to the moment they check out as a happy client.
When you combine the three factors listed above, potential customers will first discover you and then keep returning to you for quality content. It is your job to produce and publish quality content that is structured so that it’s easily visible, pleasing to the eye and straightforward to interact with.
Another thing you should be aware of is the fact that Google is increasingly pushing its algorithms and ranking factors to become more human. This means that the way people think, speak and search the web dictates how Google will sort the results and how this will impact your ability to be identified as a value provider. It all boils down to one thing – close communication with your clients. If you know what customer base wants and how they frame and formulate their desires, you can meet their needs with much greater efficiency.
Become a credible thought leader
Every company needs a voice in order to be able to relay its value proposition to the world. People deserve to know what potential solutions for their problems can be found on the market, so that they can reward the best ones and motivate the competition to work harder. Come to think of it, this is at the core of the entire online search concept: people trying to find answers to their problems. It’s a method of information discovery and exchange, and the optimal outcome is a market transaction that provides you with revenue and the customer with value.
Credibility and trust are paramount for building a successful business, especially when it comes to repeat business and sustainability. These traits are built up through consistency and gradual but dedicated efforts – it’s the small, everyday victories that ultimately grow into a great and lasting reputation. The fundamental goal of each business should be to become an answer hotspot for their customers’ questions and requests, and to create a supportive community around it. To accomplish this, you need to:
- Figure out your competitive advantage
- Specialize in what you do best
- Produce and publish authentic and engaging content
- Be informative and avoid aggressive self-promotion
- Be consistent
- Showcase relevant results
- Innovate your value creation strategy
As a direct consequence of this, smart and agile businesses need to understand that even though their long-term survival depends on their ability to generate sufficient sales compared to costs - their customers do not actually care about those sales. Customers care about receiving value, and your sales come as a market validation of that value. Even though these are two sides of the same coin, some businesspeople fail to understand which side is more relevant to their needs. As a result of that, they set sales targets without linking them to realistically deliverable value. This leads to resource wastefulness, lack of competitiveness and frustration caused by subpar results.
Understanding that sales come as a reward for recognized value might sound like common knowledge, but there are still many small businesses that go under each year. This indicates that small business owners are indeed at risk at losing their focus and their path, which inevitably distances them from the market, impairs communication with their customers and hampers relevant value creation. This is why you need to concentrate your efforts on identifying and providing valuable products and services to your customer base, and continuously request feedback from their end so that you can maintain your competitive edge.
People also associate brands with reliability, as the value behind these branded products and services allows consumers to reliably fulfil their needs. This helps create a deeper sense of trust, which directly translates into loyalty-driven revenue for the business. In some cases, achieving a loyalty increase of 7% can lead to an increase in lifetime profit-per-customer of up to 85% and simultaneously generate cost reductions for the business.
It’s worth mentioning that the impact of a thought leader doesn’t end with simply leading by example. You will also inspire others to change and improve their strategies and start their own ventures, which means the overall positive spillover will be rather significant and will likely allow you to open even more channels for creating value. Businesses in your area could evolve to become your partners or new clients. It’s a circle that should be taken advantage of as soon as possible. The prerequisite is to understand your own business, the target market, your place in the value chain and your customers.
Challenge your habits
Much like people, businesses are creatures of habit. If you look at them more closely, they follow roughly the same pattern: while they’re starting up, things tend to be somewhat chaotic. You learn more by the day, are forced to adapt to events well beyond your control and not everything will make perfect sense. After a while, a business sets up its basic operations, procedures and logistics, which gives it a degree of stability and enables it to focus on improving its efficiency.
This is a natural progression, but do not let this temporary stability fool you and make you complacent. Every once in a while, you should reassess whether your business strategy is actually appropriate for what you’re trying to achieve. If something feels comfortable in the moment, this doesn’t necessarily mean it’s the right way to do things in the long run. Breaking these habits is usually painful and people often avoid or postpone doing it, but this is the only way to generate lasting sustainability.
When it comes to scaling up your business, all of this becomes even more relevant. The fact that you got used to a certain way of doing business while you had 5 employees, 50 customers and low annual revenue does in no way mean that you can simply copy the same approach as your company grows tenfold in two years. This is why we have to go back to the importance of building a healthy foundation and defining your value creation strategy in the years to come.
You should have at least a general sense of future direction while starting your business, which will in turn allow you to conceptualize your growth path and think about the upcoming changes that you’ll need to institute in order to remain efficient, successful and attractive. A great example of this would be a small store dealing in hand-made products that goes viral overnight and receives an order which exceeds its production capacities. If there is no contingency plan on how to handle this, the company would have to disappoint many of its potential customers who may never bother to come back again after this first experience.
Of course, don’t misunderstand and abuse the idea behind shaking things up. If something works, you stick with it. There’s no need to reforge your habits if you’re already creating value that the market recognizes. After all, that’s why we’ve discussed setting up your objectives and key results. If your methodology is truthful, the numbers won’t lie and you will see progress. So, make sure you measure your outputs, compare them with goals and adjust your strategies accordingly, while practicing agility, simplicity and integrity.
Some wisdom for the road
As the environment around small businesses evolves in 2020, so must the acumen of business owners if they are to survive and succeed. Changing one’s mindset is usually the most difficult task, but it is also the most fruitful one.
The starting point is always the same – carefully map out your objectives and key results, so that you can track your success reliably and easily. Spend time defining and then constantly honing your value proposition, as this will be your path to reaching your customers. If you fulfil your value proposition, your clients will bond with you and see you as a reliable solution provider.
Create a diverse and pertinent content package to showcase your digital presence and establish yourself as a thought leader in your area of expertise. Share quality content in a timely manner, work to position yourself as the core of your local business community and then use this as a platform to further grow your base.
Do not hesitate to embrace change, and try to build a robust environment that will accommodate your need to adapt and grow as you face and conquer new challenges as a business. Finally, remember that there is no single tool that can help you succeed – choose your tools based on your real needs and seek in them what your customer will seek in you: a source of sustainable value.