Business strategies for startups are easily overlooked. Many founders do not care about strategy. This is why 9 out of 10 businesses ultimately fail.
If you are new to the business world, consider reading these articles: 10 things you should know before starting a business and starting a business is 5 easy steps.
Every business, including startups, should have a business strategy. A business strategy is a roadmap that shows us how to get where we are going.
Before drafting business strategies for startups, founders should have a thorough understanding of their businesses and business models.
3 questions to answer before formulating business strategies:
- What is my business?
- Who are my customers
- What goods and services shall we supply to the market?
These questions will help you gauge your understanding of the business you are in. Not understanding your business model is a worse mistake than not having a business strategy.
To begin with, startups should have a clear objective of where they want to go. This is a milestone that they want to achieve. These objectives precede the drafting of business strategies for startups.
Objectives could be:
- Increasing market share in my niche market by 5% in 3 years.
- Doubling revenue in 2 years.
- Reducing cost to revenue ratio by a third in 2 years.
- Increasing the customer base to 1,000 in the next year.
These milestones should be SMART (Specific, Measurable, Attainable, Realistic and Time-bound)
This will help you track progress. What can be measured can be achieved.
Important factors to consider when formulating business objectives:
- Market opportunities- Your business objectives should be in line with the opportunities in the market. An objective that is not in line with market opportunities will fail.
- Competence and resources- Your objectives should be challenging but feasible. For them to be feasible, they have to be backed by internal business competence and resources.
After coming up with objectives for your startup, it is now time to draft a good strategy that will help you meet your objectives.
An objective dictates where the startup wants to go but a strategy dictates how to get there.
2 phases of business strategies for startups
There are two phases of any business strategy:
- Strategic planning- This is focused on effectiveness. It is about doing the right things. This phase also focuses on the long-term success of a business
- Tactical planning- This is focused on efficiency. It is about doing things the right way. It is mostly focused on how we carry out our daily business operations.
These two phases are critical. As your eyes are trained on the future, your hands have to be working on the present. This is how to balance long term vision demands with short term activities.
Tactical planning should be in line with strategic planning for the startup. The small things you do every day should help materialize the long term vision of the business.
Elements of good business strategies for startups
A business strategy should have the following elements to be effective:
Mission and objectives of the startup
A good business strategy should largely consider what the business wants to achieve. This is found in the mission statement, the objectives, and goals of the business.
This is the first test of a good business strategy. After all, business strategies are roadmaps that should take us where we want to go.
If our mission is to disseminate quality and timely information to our readers, then our strategies should help us do just that. They should factor in all the aspects of the mission. I.e. Disseminate, quality, timely, and information.
Actions to follow
Business strategies for startups should be action-oriented. They should not be theories and stories that the business does not intend to follow through.
This is where we now get down to work. Objectives without actions are just dreams. After knowing where we want to go, coming up with actions that will take us there is critical.
If our objective is to increase market share, undertaking rigorous marketing campaigns is not an option. If we want to cut costs, we might embark on renegotiation with our suppliers and creditors.
These are what we are calling actions to follow. They should be precise and actionable. They should not be vague and ambiguous.
Allocation of resources
Most business strategies will require resources. These could be human or material resources. These resources will help in following our action plan.
This is a huge component of business strategies. For startups, you may want to hire cheap or free labor to help you in implementing your business strategy.
If you are short of cash, you may need to get more cash by cutting costs, increasing revenue, or getting external financing.
With these three elements, business strategies for startups are complete and ready to serve business needs.
Things to consider when drafting business strategies for startups
Good business strategies should consider the following:
- The capability of the company. This could be human or material capabilities.
- Future market opportunities. It should seek to make use of market opportunities as they arise. It should forecast industrial trends to better utilize these opportunities.
- Founders’ values and beliefs. Different founders have different values and beliefs. This should be factored into the business strategy. A business strategy should not be in contravention of your beliefs and values as founders.
- Desired socio-economic objectives. What do you intend to achieve on the social and economic fronts? This should be factored into the business strategy.
4 steps of formulating business strategies for startups
After looking at the factors to consider when drafting a business strategy, let us consider the 4 steps of formulating a business strategy:
- Determine your mission, vision, objectives, and goals.
- Generate different action plans and resource allocation strategies.
- Select the best action plan and resource allocation strategy.
- Devise ways of implementing your selection.
After all is said and done, formulating a good unique selling proposition (USP) is critical. This will help you stand out from your competition in your marketing efforts.
It is also important to note that business strategies for startups should be flexible. They should be able to accommodate the dynamic business environment of the 21st century.
When things happen that are beyond your control as a startup founder, you need to adjust your business strategy to take advantage of the new opportunities and overcome the new threats.
Founders need to formulate effective business strategies. For startups to thrive and dominate in this competitive business landscape, effectiveness and efficiency should be made priorities.
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Founder/ C.E.O- Wealthy Wolves Consulting & Giimark Ltd/ Best-selling Author/ Speaker.