Why small businesses need strategy more than ever

Think the current climate is a good excuse to ignore strategy? Apparently you couldn't be more wrong...

by Alastair Dryburgh
Last Updated: 31 Aug 2010

'Small businesses don't need strategy'. This view was expressed to me, in all seriousness, at a meeting of an organisation of consultants. I can't think of anything more dangerous - particularly in present conditions. Strategy doesn't have to be as complicated as consultants and academics tend to make it - it simply means understanding what you sell, who you sell it to and why customers come to you rather than someone else. Here are some more good reasons why SMEs need strategy too:

You save management time - often the most limited resource in a small business. Thinking strategically means being crystal-clear about what makes sense for you to be doing and what doesn't. Strategic confusion can dissipate vital energy to the point where the business fails.

You avoid being railroaded by big customers. SMEs are more likely to be dominated by the demands of one or two big customers. If these are pulling in an unprofitable or unsustainable direction, it can be hard to resist. Clear strategy is essential to stay on the profitable path.

You know your sweet spots. A good strategy helps you to understand your market and why customers buy from you - knowledge that many larger firms don't possess to anything like the same degree. You might not have lots of operational specialists or a middle-management layer to keep on top of the detail like they do, but if you stick to your sweet spots you can afford a degree of inefficiency.

Finally, strategy in small firms is easier to do. The business is simpler. Better still, communicating it and ensuring that everyone acts in accordance with it is, relatively speaking, a breeze.

Alastair Dryburgh is head of Akenhurst Consultants - www.akenhurst.com

In today's bulletin:

RBS slumps to record loss - and Sir Fred gets £650k pension
British Gas fails to profit from higher prices
Berkeley plans to make hay from housebuilder woes
SMEs' unhealthy desire for Fry and Sugar
Why small businesses need strategy more than ever

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