Business is growing. Products are flying off the shelf, your reach is expanding, your market share is becoming more and more dominant. You find yourself having to hire more people and shift the ones you already have into leadership and management roles. Things are happening so fast that you can barely keep up.
Then your accountant comes to you and shows you how you’re losing money. How can this be? You have more customers buying more stuff from you than you ever have before. Your competitors’ customers are running to you, and you’re getting pressure to expand beyond your regional market. How can there be a net loss?
The example above demonstrates a common scenario for small and midsized businesses in the growth phase. The conditions are a byproduct of poor (or simply the lack of) planning and strategic formulation. Growth for the sake of growth, or what we call “reactionary scaling” can be ultimately toxic for your business. I’m going to outline some common mistakes we see (especially with regard to a brand’s digital marketing strategy), and how to avoid them.
1) You Don’t Have a Business Analyst or Strategist on Staff
The first step to doing a job correctly is ensuring that you have the right toolkit. Many small and midsized business owners aren’t aware of it, but there are people trained and experienced specifically in analyzing opportunities and efficiency of their business process. A problem we often see is that a founder or CEO believes that their role is to tackle the analytical and planning task. It isn’t. As the CEO you should be doing whatever you can to avoid micromanagement, including of marketing and strategy. This is both because you are the visionary and need to keep the 30,000 foot view, and because you probably aren’t the best equipped to do something like market your idea. Hire an expert. For a larger business this might mean creating a position or even a department, but for smaller and midsized businesses it likely means partnering with a consultant or an agency, especially when we talk about digital marketing strategy. Agencies specialize in actualizing your market potential, and represent a team with depth and breadth of experience that no one person (even you!) can possibly command.
2) You Haven’t Planned Your Growth Strategy
Back to the toolkit analogy. If the first tool to effective growth is consulting expertise, then the second tool is drafting a plan. You’ve probably heard the adage: “proper planning prevents poor performance” (and there are a few more colorful variations, too). A good strategist or agency will immediately sit down with you and draft a plan document that outlines your long term vision and goals, and what that looks like for your business over the coming 12-18 months (longer than that we see too high of a degree of market variation to have a documented plan reasonably impact daily decisions). Our agency has started doing this with each of our clients, and we now have a codeveloped working agreement that we can turn to in the daily decision making process and say “This seems like a really good opportunity to make some extra money, but is it in line with my overall strategic vision? Does it serve my long term goal for my company?” If it doesn’t, than we can reasonably say that for us, it is not actually a good opportunity, even though it represents some short-term income gain.
3) Your Plan Lacks Appropriate Detail
In the data analysis field a term comes up often that has a whole lot of importance: “data granularity.” What this means is the level of minute detail a given data set represents. The more detail, the more meaning we can extract when we analyze it, so having high data granularity is a priority of data collection. In the same sense, having a highly granular plan allows us to make much better decisions on the ground level. In addition to the 12-18 month strategic plan, we work with our clients to develop shorter term task lists that nest within the strategic formulation framework. These are produced quarterly or monthly and allow us to develop a clear scope and division of labor for our deliverables. This provides both granularity and the ability to adjust the deliverables as necessary without rewriting the entire business marketing strategy. Paradoxically it is having a highly-detailed short term task list that allows for overall plan modularity. Without a high level of detail, your strategy becomes impossible to implement, which leads to scope creep and ultimately the deterioration of your plan and vision.
4) Your Model Doesn’t Scale
A lesson that many small business owners who have tried to turn into midsize or large business owners can reiterate is that not all models work at all scales. In the scenario described in the introduction we saw a condition in which a business, despite significant growth, had not effectively scaled and was paying attention to just revenue, rather than gross. If the growth strategy is long-tail then losses in scaling might be acceptable, but again, this should be nested within careful planning. A major advantage of partnering with an agency is that they are equipped to analyze and make recommendations on the scalability of your business or strategy. They should be setting up an analysis and accountability protocol that is doing this constantly, so you can rapidly discover when your model is no longer returning the greatest efficiency and pivot it as necessary.5) You Are Scaling Too Quickly