The COVID-19 period and the following global instability have been cited as major barriers to growth, thus hindering the development of many small businesses.
As external financing availability shrinks due to the recession of many global economies and competition from major international chains grows, some owners think that success is not attainable and give up too early. However, the success of small businesses does not depend exclusively on macro-environmental factors since some companies still manage to reach their goals in the current turbulence.
A growth mindset largely depends on the presence of proper processes and procedures as well as the knowledge of common pitfalls that should be avoided at all costs to save valuable resources. For example, using a grammar checker instead of a paid external proofreader may be a good way to save some money without compromising the quality of your marketing texts. On the contrary, cutting down the salaries of your well-performing personnel members due to a difficult financial situation is an extremely risky and unsustainable strategy.
In this article, we will analyze the top five mistakes hindering the advancement of small businesses.
The most basic mistake that everyone knows about and everyone continues to make is not having a detailed business plan. Can you name the figures of your electric bill without a long search and state how they have been changing throughout the previous six months? Chances are, you are simply paying the invoices you receive from many providers and subcontractors without seeing ‘a bigger picture’ of how your business operates. Some entrepreneurs wonder why they should be calculating every cent of their spending and revenues if they are getting the desired profitability. There are multiple reasons to pursue this practice for several months.
- You cannot plan expansion via marketing campaigns if you do not know how much ‘extra money’ you have every month.
- Continued control over all expenses is the key to finding inefficiencies in your budgeting.
- A longitudinal analysis of pricing allows you to change your suppliers and subcontractors when they exceed a certain limit making your cooperation ineffective to you.
Putting it simply, the absence of a clear business plan leaves you in the dark regarding the amount of money you have, the amount of money you lose, your budgeting inefficiencies, and your potential for advancement. This means that your growth-oriented spending will be based on guesswork leaving your success/failure chances 50/50 at best.
Another growth problem directly affecting your business productivity is the lack of clear positioning. While you may not have the brand power of large corporations, you must clearly understand your niche and your key customers.
Ask yourself the following questions:
- Who are our key buyers?
- What are their age, income, and preferred hours of visit?
- Are they subscribed to our social media profiles?
- Do they receive sufficient motivation to remain loyal to us?
While this may sound counter-intuitive to some business owners, existing consumers may be viewed as the basis for growing your enterprise.
Consider the following facts:
- New customers are costly to attract and retain.
- Your current customers are already loyal.
- They can be retained and motivated to buy more using fewer resources.
- They have friends, relatives, and ‘warm’ social contacts whom they can also expose to your brand.
The solution is simple. As a small company, you need to focus on your customer niche, win all consumers you can reach, and invest most of your resources in their retention.
The lack of knowledge about your core customers frequently leads to the lack of clear segmentation, targeting, and positioning strategies. What is the optimal time to reach your audiences on social media? Do most of your buyers come from your local area? What are your customer demographics? Which of their needs do you not know about presently?
If you cannot answer these questions instantly, your marketing budget will be lost due to poor targeting choices and attempts to reach the wrong audiences at the wrong times via the wrong channels. You may need to organize some focus groups or ask your loyal customers to share their insights in exchange for some bonuses and discounts. This will grant you a clearer picture of your ideal audiences and their preferences. Afterwards, you simply have to do ‘more of the right thing’ to grow your business in a consistent manner.
While you should be seeking to grow as fast as you can, you cannot achieve high growth rates without substantial investments in your marketing activities. There is always a fine line in income reinvestment where you start putting too much of your reserves into your advancement and forget about risk management. Considering the existing macro-environmental climate, you should always prioritize your safety over your progress. Keep in mind that sustainable growth and development take time and cannot be achieved overnight. However, unexpected problems that are not instantly addressed with your cash reserves can cause serious harm very quickly. Just think about the consequences of investing a little bit too much into your marketing campaign and failing to pay your utility bills in the case of rapid price growth caused by the developing global crisis.
As noted earlier, there are different ways to cut your costs. The main reason why small business owners seek to reduce their expenses beyond reasonable levels is associated with the fear of raising prices. However, most companies of this size cannot utilize the cost leadership strategy since they lack the synergies and economies of scale usually possessed by large corporations. The alternative differentiation approach involves the use of unique value propositions making your products and services distinct from your competitors.
If you complete the previous steps, find your core customers, and secure their loyalty, you may find that their reaction to a 10-15% price raise may not be as pronounced as you fear it might be. They may still be willing to be loyal to your brand if you continue to deliver the same standards of quality and care. On the contrary, excessive cost-cutting may be detrimental to your sustainable competitive advantage and may lead you to growth problems.short url: