Three Business Strategies to Have in Place

Setting off into business without a plan is a little like riding into battle without one: things tend to get messy.

To be successful, a business needs clear objectives and strategies in place to reach them. These are three worth spending proper time on.

No plan? Ouch.

Plenty of businesses run on instinct, and sometimes that is exactly the right call. But for the general running of a company, it pays to sit down properly, work out what you are trying to achieve and write down how you intend to get there.

Three main business strategies

Here are three areas of strategy that deserve real attention rather than a passing thought.

Financial strategy

A financial strategy sits at the centre of the overall plan. It sets out how the business will fund its operations to meet its objectives now and in the future, and it identifies the targets to be reached over the next three to five years.

Three questions are worth answering carefully.

Where is the business now?

Set out the position you are starting from: the resources you have available, and the risks you are carrying.

Where is the business going?

Focus on the financial targets for the next three to five years. At a minimum, this covers:

• The funding mix you will need to reach those targets: what comes from ongoing revenue, what from borrowing or investment, and how that balance shifts over time.
• How much you are prepared to depend on outside funding, expressed as a share of overall income.
• Your cash reserves, usually expressed as how long the business could keep operating if income stopped.

How will the business get there?

This is the year-by-year plan for financing the strategy and reaching the targets:

• How core costs will be funded.
• How reserves will be built up.
• How fixed assets will be replaced and maintained.
• Where under-used resources, such as space or vehicles, could be put to better use.
• Where prices may need to rise to recover the cost of delivering what you sell.

Marketing strategy

A marketing strategy is the overall plan for reaching more of the right customers. It is worth keeping separate from a marketing plan, because the two are not the same thing: the strategy sets out what you want to achieve, and the plan sets out how you will achieve it.

Before writing either, be clear about what makes your product or service different, and why that difference matters to a customer. Then spend some time on the market itself: who you are competing with, which is always somebody, and who you are actually trying to reach.

With that in place, the traditional four Ps give you a structure to work through, and People is worth adding as a fifth:

• Product: what are you selling, what is different about it, and what does it give the customer?
• Price: what does it cost, what are the margins, and how does that compare with the alternatives?
• Place: where will people buy it, does that fit how the brand is positioned, what does it cost to get it to them, and what happens if they need to return it?
• Promotion: how will people find out about it, and do those tactics match the brand's voice and its audience?
• People: who else is involved in delivering it, what do they do, and what experience do they bring?

Be thorough, and keep the brand's voice in mind throughout. The way you describe what you sell should sound like the business, not like a template.

One practical step that helps here is to write down a handful of customer profiles: who they are, what they need, and what makes them choose you over the alternative. They are useful for the marketing plan and for every decision that follows it.

Pricing strategy

Pricing takes the financial strategy and the marketing strategy into account, along with market conditions, what competitors charge, your margins and your costs. It is one of the decisions that most directly affects whether the business works: price it too high and people go elsewhere, price it too low and you can be setting yourself up to struggle before you have started.

There are four approaches worth knowing:

• Premium: where the business holds a genuine competitive advantage, it can charge more than similar products or services. It depends on that difference being real, and being understood by the customer.
• Penetration: price low to win market share quickly, usually when something new is introduced, then move towards sustainable pricing once that foothold is established.
• Economy: accept tighter margins and aim for a wider audience, and a larger share of it.
• Skimming: price high while the product is new and competition is thin, expecting prices across the category to fall as other suppliers arrive.

Whichever approach you take, it has to hold together with the other two strategies. A premium price attached to an economy experience is a short route to an unhappy customer.

Where to start

If the idea of sitting alone with a notepad headed business strategy feels daunting, that is fairly normal. The point is not to produce a document for its own sake. It is to decide what the business is trying to do, and what has to be true for that to happen.

If you would like help thinking it through, our digital strategy and planning work covers working out what to do first, and what it will take. You can also get in touch to talk it through.