It's easy to assume that to know the core of the American economy, you follow the money all the way to Wall Street or Silicon Valley. But Bplans.com, a small business resource site, suggests quite the opposite. The site offers more than 500 sample business plans for aspiring and seasoned entrepreneurs in a variety of industries and tracks the popularity of the plans in each category. Since 2012, the top five industries have stayed the same, and tech is no where to be found. In contrast, service, restaurant and cafe, retail, medical and healthcare, and manufacturing businesses have been the most popular industries among the 1 million monthly unique visitors.
Although we may read about a new startup or IPO every day, those talent magnets are not the backbone of the American economy. According to the Small Business Administration, Main Street small businesses account for 99.7 percent of U.S. employer firms and 63 percent of the net new jobs created between 1993 and mid-2013. The backbone to our economy is the small businesses in every town that provide the products and services we use every day.
As the heart and soul of our economy's economic health, it's important that these entrepreneurs are prepared for the unexpected ups and downs of owning a small business, and not any business planning method will do the job well. Though these businesses may not be the most tech-savvy, they can still use some of the planning methods of Silicon Valley's most successful startups:
Develop a data-based culture
It's easy to rely on your gut when you're a small business owner. Many times, entrepreneurs start a company because they already possess a strong business instinct that pushed them to market. But as a business grows, it becomes even more important to inform gut decisions with as much information as possible.
To make better decisions, track key performance indicators (KPIs) against your plan and understand the variance between planned and actual results. This tracking should go hand in hand with how you monitor your cash flow. Many businesses go bankrupt because they run out of cash, not because they lack profits. Understand how things like inventory, supply costs, and client payment schedules affect your cash flow. If you understand your cash levers it becomes easier to adjust those levers, and implement strategies to keep your business cash healthy. For example, you might implement late fees to clients who don't pay their invoices on time, and reward clients who pay early with a small discount.
You should also look to outside data to better inform how you run your business. Research your industry and market conditions to understand what you're getting into as well as how your business should be performing. Industry benchmarks are easily available online and can help you understand areas where you can more easily improve your business performance.
A hair salon, for instance, typically brings in 30 percent of its revenue from products they sell to their clients. If you are running a hair salon and only bring in 10 percent of your revenue from products, you should focus on strategies to sell more products to your client to be more in line with the industry average. Your business does not exist in a vacuum--your decisions should be informed by the general business climate as well as your own financials.
Use lean planning methods
The old-school, traditional business plan just isn't a good fit for most small businesses today. With a new business, many plans can change quickly as owners learn on their feet and make better decisions with practice. But just because a traditional, static business plan isn't the answer does not mean that planning should be abandoned altogether.
Instead, engage in lean planning. Lean planning is a methodology for creating flexible business plans that can easily adjust based on real data on an ongoing basis. A lean business plan includes an executive summary; financial plans with a sales forecast, profit and loss, cash flow forecast, and a balance sheet; an action plan with scheduled milestones; and accountability. Lean planning also includes tracking your actual results against your plan in order to understand what is working and what you need to fine-tune. Knowing you missed a revenue target, and then examining and understanding why it was missed, gives you the necessary information to make the right decisions going forward. Without the planning and tracking, you miss an opportunity to get additional information to run your business better.
Lean planning also allows you to add new products or services more easily. When you track your financials against your goals and the market, you can see where it's best for you to expand and see the financial requirement necessary to commit. Once you launch, the impact on your overall business is more clear and you can tweak your plan as you navigate the inevitable bumps in the road. A plan is not about actually predicting the future, but instead about setting goals and understanding what it takes to reach them. You may have to reevaluate your plans, adjust and pivot. But without a plan, and goals to reach for, you are essentially driving in the dark.
Create an intelligent conversation around your business
Small businesses tend to be very careful about spending money on marketing and advertising. They are often mystified when it comes to "marketing" and not sure where they should spend the little bit of money they have. A little lean planning goes a long way in figuring out how to maximize your marketing and advertising budgets.
First, listen to what people are talking about in your industry. See what trends and topics get people excited on social media, in professional journals, and in the news. An easy way to do this is to use Google alerts to track key words and phrases online. You can also consider a Twitter account to follow industry thought leaders for relevant news and to build connections with others in your field.
Further, network with people in your immediate circle as well as other business leaders in your community. What problems do they face? What do they think about your business and what resonates with them? Their responses might enlighten you as to new messaging you can consider for your services. Listening to potential customers and talking to them is actually what a fancy, high-paid business consultant would call "market research."
When you have done your "market research," its time to decide on how you will reach your customers. Try not to spend a single dollar that does not directly drive sales. When your budget is small, you have to be strategic. Don't do any advertising that can't be tracked, and think about how you will track a special promotion so that you can measure the success.
Social media and your own website can be your first outlets. On social media, you can advertise new products and services to a very targeted group of potential customers. You can also promote deals or coupons and get to know your customers. Of course, if your market research shows that your target market does not like/trust/use social media, then save yourself the headache.
For your own website, make sure the content is friendly but professional and very clear about your offerings. Tracking traffic to your site with Google analytics allows you to see how users arrive at your site and how long they stay there. In the data, you can find clues as to what your customers like, what they click on, and whether they want to purchase anything from you. If you are not sure how to use Google Analytics, find a friend or family member that knows. This stuff is not that difficult anymore and should not cost you a lot of money to implement correctly.
America's small business are the backbone of our economy. Just because they aren't necessarily in the tech industry, does not mean they should be stuck with old-school business management methods. Don't let your day-to-day list keep you from being strategic, implementing some lean planning strategies, and managing your business financials. We live in a world where technology has evened the playing field for small businesses. Take advantage of online tools, educate yourself on better small business management, and take your business to the next level whether it's a restaurant, day care, or manufacturing business.