IT’S YOUR BUSINESS: WHAT DO YOU WANT TO DO?

The steps outlined so far will help you to stabilise your business. However, the point of a turnaround is that it should enable you to go on to rebuild your business. In order to be able to do this, you need to put in place a regrowth strategy. The steps involved in creating such a strategy are as follows.

First, think through what you want to achieve personally from the business and set your personal goal’s. Next, understand (as far as possible) the big ‘external’ forces that affect your industry and business and what opportunities and threats arise from these.

• What is happening in the business environment? (Carry out a PEST analysis – see below.)
• What forces are shaping the structure of your industry and how much money can be made from your industry? (See industry structure: ‘Porter’s five forces’ below.)

You must now understand your own business and its strengths and weaknesses:

• What products are you supplying into which markets, and what potential growth strategies are there?
• Where are your products in their lifecycles and have you got an appropriate portfolio of products?
• What do your customers want?
• What is your competitive advantage (based on what your customers want) within your industry and on which you can build?
• What is your unique selling proposition?

Finally, decide what strategy to pursue and then create an appropriate value chain and put in place an action plan.

SETTING YOUR PERSONAL GOALS

To set your business strategy you will need a plan that matches:

• your ambitions for your business;
• your type of business; and
• the circumstances you find yourself in.

To produce a meaningful set of personal goals it is worth asking yourself three questions.

1. Why are you in business — what motivates you?

Is it:

• The sheer challenge, the satisfaction of overcoming obstacles and winning through, or beating the opposition day after day?
• A drive to be creative, using your business as a way of making your dreams real?
• Independence, in that you need to be free to operate in the way you want to, without being told what to do?
• A sense of security and stability where you are looking to feel you have ‘made it’ and are financially secure?
• A mixture of all the above and, if so, in what proportion?

2. What type of skill have you based your business on?

Is it:

• Your specific technical expertise, where you have developed skills as a doer or seller and want to exploit them to the full? (But beware of the administrative burden of running your own small business, which will get worse as the business grows in size.)
• Your general management skills, where it’s not your own specialism but your ability to manage other people that provides the basis for the business?

3. What are you trying to achieve by being in business?

Is it:

• A comfortable lifestyle with a good short- or long-term balance of work and outside interests?
• To building up or maintaining a stable business to hand on to the next generation?
• To build a business for sale to allow you to go on to other projects?
• To expand your business to be the biggest or best in the industry?
• To act as a provider of some special service or value, perhaps expressing some deeply held religious or other values (such as environmentalism), and perhaps even run deliberately as a nonprofit-making organisation?

Having a clear view of what motivates you, of what types of skills you have based your business on and of what you are trying to achieve in running your business is critical to setting meaningful goals.

Having established your personal goals, you will want to run your business to achieve these. You then need to turn these goals into a set of objectives that are SMART:

Specific.

Measurable – that can quantify the results.

Achievable.

Relevant.

Time bounded – are governed by deadlines.

This will allow you to specify the actions you will need to take in managing your business to achieve these goals and to start to prioritise your goals using the ease/impact matrix from Chapter 6 (Figure 13). So think through what it is you are trying to achieve and then fill out a table like the one shown in Figure 17.

Has this helped you to clarify what you are trying to do and the things you need to make happen to achieve this? Having undertaken this exercise you should also ask yourself the following questions:

• What are my key managers’/staffs personal goals?
• Are these compatible with my goals and my business strategy?

If there are major differences (Fred, in production, wants the quiet life, but your strategy calls for a significant expansion of the business), you now have an early warning of a likely management issue. This will give you the direction you want to go in. However, there will be factors outside your control that will be influencing your business and that you will need to analyse.

INDUSTRIAL TRENDS: PEST’ANALYSIS

The world is a changing place. Developments across a range of factors will have an impact on your industry or business. So, ask yourself: What are the major trends in the business environment in which I am operating that will affect my industry and business?

There are four main headings you need to consider for any industry (PEST analysis), so complete a table like the one shown in Figure 18 for your business.

Perhaps a fifth heading should be added to these: industry realignment, e.g. European and US widget makers entering the UK market and purchasing small UK manufacturers. How is the impact of these factors going to change your industry over the next five years? How does your business need to change to meet any threats arising (e.g. a need to invest) or opportunities opening up (e.g. new markets or an opportunity to sell the business)?

INDUSTRY STRUCTURE: ‘PORTER’S FIVE FORCES’

The attractiveness of any industry and the potential to make significant profits tend to be governed by the interaction of a number of forces. These can be analysed by asking the five key questions shown in Figure 19.

WHAT PRODUCTS TO SELL INTO WHICH MARKETS?

Most business will have a ‘portfolio’ of products and markets. The starting point for assessing your opportunities to sell particular products in particular markets is by way of a product/market (‘Ansoff’) matrix (see Figure 20).

Set out a basic matrix for your business by asking the two questions shown in the figure.

Once you have plotted this, do some more homework:

• What is the size of each product market box (segment) as a potential market?
• How much do you sell into this box (your ‘share’)?
• Is the market demand in that segment growing, steady or declining?

The four basic growth strategies for any business are then (in normal order of ease/risk) as follows.

1. Market penetration

Improve your market penetration by boosting sales to your existing customers who already know you and your products:

• Look for the gaps – UK supermarkets (existing customers) are not taking any widgets (an existing product). Why not? What can you do to change this?
• Increase your share of a channel – do you supply 1%, 10% or 100% of small UK shops’ demand for widgets? How can you increase your share of that customer/market’s spend on this type of product?

As these customers already know you, try holding a regular service review meeting (or quality control review) to create opportunities to ask for more business. Send them a newsletter, a loyalty discount and new product details.

2. New customers and markets

Develop new customers and markets for your existing products (e.g. for widgets, box X):

• Can you persuade existing customers to refer new customers to you by incentivising them?
• Can you identify new types or groups of customers to whom you can sell (e.g. the company in Figure 20 might think about approaching garage chains or overseas distributors).

3. New products

Develop new products based on your existing core skills to sell to your existing customers to meet their other needs (i.e. box Y). How about the company in Figure 20 adding on a widget rental business, or becoming the UK licensee of the new Italian ‘Gadgetti’?

4.Diversification

Finally, and most risky of all, there is diversification (i.e. box Z) – developing a new product for supply to a new set of customers. This is risky because you need to develop a new product about which you have no knowledge and sell it into a new market where you have little existing credibility as potential customers do not know you. So even if you do decide to diversify, try to make it a logical step based on some of your core skills or strengths so as to minimise your risk.

To achieve most from each of the above strategies, you will need to focus on the most attractive product/market segments, which are those:

• with high growth;
• where you make high profits (can you analyse your profit and loss by product/market segment to give you this information? – see Chapter 7); and
• where you have the most strength on which to grow.