To ensure 2023 is a successful year, business owners need to evaluate the changing market and perform strategic planning for the year. Even a smaller 1-5 person business will benefit from performing a quick strength and weakness assessment analysis of their current business market. This helps owners be proactive vs reactive and helps ensure 2023 is a successful year. Ask yourself the following questions:
What is the strength of your business?
What are you able to do that is better than your competition? Is it the lowest price? Best customer service? The value add you give back to your customers? Or something else? By successfully identifying what your business excels at and reinforcing this core value with your employees can help you gain market share. For example, if your company excels at customer service, i.e. the follow thru after the work or sale has been completed, then having a customer referral program or loyalty program can help gain more clients. If the strength of your business is lowest cost, then take a hard look at how you can lower your costs even further…..a laser focused approach to even bringing down small monthly costs like phone service thru a VOIP system, shifting to more fuel efficient vehicles, or purchasing raw materials you use in bulk for volume discounts can help you further reduce your cost of goods sold.
What is the main weakness of your business?
Is it the quality of your labor (employees), equipment breakdowns, slow paying customers, or something else? Each of these has a solution and needs to be addressed. One of our clients in manufacturing has been struggling with their labor…put simply the welding required on their product was not only time consuming but the quality/control wasn’t consistent. They were reluctant to invest in robotic welding equipment as the monthly payment from the equipment didn’t seem to justify their return on investment. After going thru a cost/benefit analysis with them, they realized that they also were having 20-30% of their product having to be rewelded/remanufactured. By adding this machine, the monthly payments broke even on the labor costs (they were able to cut one employee) and they had the added benefit of higher customer satisfaction. A year later their customer has hired them for an additional product line.
What are the current and upcoming threats to your business?
Is it new local competition, new smaller contractors starting and trying to take business from you? Is it increased government regulation or new environmental policies, or tight labor supply? One of our clients that operates a restaurant in a downtown metro area has seen their customer base gradually decrease in the last few years. They aren’t facing increased competition but the opposite. Many of the retail businesses that were around them have shut down, vacancies have increased, and as a result less people are visiting their area. They have made the strategic decision to move their business to a more growing suburban segment, and as costly as the transition was, they are now seeing positive cash flow and are on a growth trajectory. In addition, their rent in the new location is much less and there is a nearby college that gives them more of a consistent clientele.
The last evaluation that is worth an analysis of is the current/future opportunities you have to expand/increase revenue market share.
As an example, one of our customers has been paying rent for years and they have identified a new location that will enable them to purchase their own building. They are adding a building bigger than what they need and subdividing the space….by subdividing they are able to get passive rental income from the tenant as well as give themselves an opportunity in the future to expand production when the volume makes sense. When doing an opportunity assessment your focus should be on the short term as well as long term….what are the strategic ways you can build wealth for your business over the next 5 to 10 years?
Whether you address one or all, knowing where your strength, weaknesses, opportunities and threats lie will help you guide your team to a successful year.