How to Succeed in Business? 5 Strategies for SMEs

SMEs offer different products and services, but usually face similar challenges. Q2’s “how to succeed in business” strategies apply to all SMEs, regardless of size, industry, or life cycle stage.

1. A Business Plan

Q2 encourage all businesses to have a “one page” business plan that covers purpose, vision, what they want to achieve (business and personal), values, KPIs, high level budget, target market, value proposition, opportunities, vulnerabilities, critical challenges, and most importantly… an action plan.

The plan is a valuable management tool and should be used to make decisions, avoid distractions, and share with your team so everyone is aligned and engaged. Business planning is a vital business discipline.

2. Business Structure

At start-up phase the business owner usually does everything. As the business grows the organisational structure should be formalized with role descriptions, reporting lines, and KPIs for each role.

Because the business owner usually focusses on income-generating technical work (production and service provision), often the sales and marketing roles are under-resourced. As a result, SMEs grow slowly.

Ideally, the business owner will quit the technical work and focus on leadership, sales, and marketing thereby enabling the business to grow more quickly.

3. Financial Forecasts

Financial forecasts provide targets and an early warning of problems ahead.

Most SMEs use the “top-down” approach – “sales will be about 5% up on last year, and our gross profit (GP) is X%, our overheads are Y, so our net profit before tax will be Z”.

However, a “bottom-up” approach challenges the status quo. For example, say we want to make $500k. Overheads are $400k so our GP needs to be $900k. The industry average GP is around 30% so to make $900k GP we need sales of $3m. The next question is “how are we going to do that?” and quality business thinking follows.

“3 way” financial forecasts are useful because they include profit, cashflow and balance sheet. Most businesses focus exclusively on profit, but your business is more likely to fail because you have inadequate cashflow and a weak balance sheet.

4. Reporting

Accurate, timely and relevant reporting is a critical business discipline. Technology allows even the smallest business to get accurate financial reports in real time.

The best practice is monthly financial reports, and daily / weekly KPI reports. There should be a maximum of 5 KPIs for each person, department or business with a focus on lead measures that drive results.

5. Personal Development

Which is worse? You invest in someone and they leave… or you don’t invest, and they stay?

There is an abundance of information, courses, books, You Tube videos and blogs available. But most of what we learn is shallow, forgotten, or not implemented. Therefore, we should learn less but study more deeply.

For example, next time you read an excellent business book take notes, highlight key points, reread it several times, make a summary, and review the summary annually so that the learning becomes deeply ingrained and implemented.