The United States hasn’t had such a boom in new business formation in decades. Entrepreneurs across the country have responded to the opportunities that a global economic transformation has brought about. Yet, new businesses have a high failure rate because the typical entrepreneur does not have the right strategies to grow their business. This is what you should know.
Understand the Competitive Forces
Venture capitalist, Peter Thiel, once said that “competition is for losers”. Your number one goal is to navigate the competitive landscape to find a path to growth and profitability. You have to understand the five competitive forces within your industry:
- Threat of new entrants
- Bargaining power of buyers
- Threat of substitutes
- Bargaining power of suppliers
- Industry Rivalry
The most important competitive force is the threat of new entrants. Competition is for losers because in hyper-competitive markets, industry players are price takers, not price setters. That means making a profit is very difficult, because instead of making a profit, industry rivals are forced into price wars.
Check for Product-Market Fit
Venture capitalist Marc Andreesen has called product-market fit the “only thing that matters”. Product-market fit refers to the appropriateness of your product for the market. If you have product-market fit, then customer demand will be so great you will struggle to meet demand. This is the true secret of growth. If you don’t have product-market fit, you have nothing. You need a product so good customer’s can’t get enough.
Turn Your Business Into a Centre of Creativity
No matter how good your product is, you will need to develop more products, or at least to improve on that product. To do this, your business has to be a center of creativity. How? Psychologist Mihaly Csikszentmihalyi noted that creativity is about creating spaces where people of different cultures, backgrounds and domains can experiment. By becoming a center of creativity, you will be able to generate new ideas and develop new products. It’s hard to be creative when you have a uniform, rather than a diverse company.
Determine a Decision-Making Framework
Entrepreneurs are famed for their confidence and belief in their instincts. However, if most new businesses fail, that confidence is often misplaced. What you really need is a clear decision-making framework. Decision-trees should be your number one decision-making tool. Decision trees allow you to explore and unearth various options and the consequences of decisions you take. In addition, by weighting each option with what you think is their likelihood, decision trees enable you to think more objectively about what you are trying to do.
In addition, you should have a meta-decision-making framework that will help you decide what decision tools you should use for specific circumstances. For instance, businesses usually use traditional capital-budgeting tools when deciding on how they can create value, even though these tools are not appropriate in terms of uncertainty. Having a tool to decide hot to decide, is very useful.
Measure What You Can
Many problems that imperil new businesses have to do with the lack of measurement done. Measure as much as you can and follow the data. You have to treat your business as a laboratory of ideas, measuring and testing in search of the best product that you can deliver.
Yet, even tech entrepreneurs often do not embrace a culture of measurement and following the data, relying on their “gut”, or other nebulous factors. If you can’t measure it, it’s hard to improve it.
Find Your Purpose
Google’s mission is “to organize the world’s information and make it universally accessible and useful.” and its vision is ultimately, “to provide access to the world’s information in one click.”
It’s important to have one clear organizing mission and vision. This should be the organizing principle around which every single decision you make is taken.
If you don’t have a clear sense of what you want to deliver every single day (your mission) and what your business should do after, say, 100 years, then you will not be able to act strategically, because you will lack a clear goal to aim at. Your purpose is your North Star, and if you embed it into the DNA of the organization and ensure that even at the lowest levels of the organization, everyone knows what your business’ purpose is, and that it’s important to each it, your business will always act strategically. Once you have a clear purpose, you should always think, “How does this decision help me achieve my purpose?”
Customize Your Sales Funnel
Every business has some kind of sales funnel, but many businesses do not customize their sales funnel to suit their specific needs. Your sales funnel has to match the customer journey, which maps the steps that customers typically take in your store, whether it’s online or a brick-and-mortar store.
You need to enrich the customer journey and make it as seamless as possible. Collecting data about the customer journey will help you achieve this.
Use a Customer Relationship Management (CRM) System
Having a good CRM system will help you improve your relationships with your customers. This is essential to enriching the customer journey and improving customer experience. No matter how much money you spend on marketing, your best source of new customers is the pool of customers you have. A good CRM system will help you understand your customer’s needs better, by giving you insights about their previous interactions with your business and its products. You can even tailor notifications based on what you know about the customer.
Create a Virtual Office
As a small business, you will lack many of the tools that a larger, more well-established business has. Using a virtual office will give you access to various services, technology, or space, without you having to bear the capital expenses or leasing a traditional office.
The rise of remote work during the pandemic, and the number of companies that have become fully remote, shows that these tools can be used to make an even more profound change in your business model, and, if possible, have a fully remote business. You can learn more about virtual offices here.
