Is your business a hobby? Did you look for something that you are
passionate about and then go for it? Were you able to turn that hobby
or passion into a real money-maker?
The truth is that about 90% of small businesses fail. There are multiple reasons for the disasters. An important and not so obvious truth about all these failures is that the failure starts in the planning process. The battle is won in the mind before the game even begins. So, how do you create a master plan that will give you a great chance of success? The beginning, of it all, is to understand strategy.
Business Strategy Rules to Live by
1- A business owner must gain proprietary intellectual property.
Selling a commodity is nearly impossible to make a profit on. And, small businesses can't compete on price against large rivals with superior purchasing power. Since consumers are so price motivated, the small business must find a way to innovate. The innovations do not have to be large or "earth shattering". Innovations can also be small. For example, you might discover faster ways to organize your materials than your competitors or see a way to do something cheaper and better. Holding onto these good ideas and protecting them will go a long way towards long-term profitability.
2- A business owner must understand short-term thinking.
If you study game theory or the prisoner's dilemma, you learn that people always go for the short-term strategy. Some strategists point to long-term win-win scenarios, but these strategies rarely, if ever, play out as planned. Instead, people are always looking to get the best advantage possible. This results in short-term thinking. What a business owner must realize is that their employees, their suppliers, and their competitors will do what is best for the short-term. It's sort of like Keynesian economics. Take care of the short-term and the long-run will work out. Of course, this type of economics also states that in the long-run we're all dead.
We can always come up with reasons why long-term planning is best and even look to a few examples of it being applied correctly. However, the science of business proves short-term thinking works and that it is prevalent within companies and individual motives. In other words, put this into your planning process.
3- A business owner must understand deception.
There are many ways to interpret the word deception. It does not mean you have to lie, cheat, and steal. Instead, it might mean finding ways to hide your secrets from competitors. It might mean managing employees in ways that they do not know enough to compete with you. It could also mean that you use clever ways to gain proprietary intellectual advantage. One example of this would be to use spies. Large companies are adept at using spies. How many times have you seen a competitor hire an employee from another company for the sole purpose of learning what they know? This is common practice. Everybody is trying to do the same thing. The people doing it best win!
4- A business owner should only accept challenges they know they can win.
Many business owners are pretty cocky. They think they can compete with anybody and that they can do anything they want. This is not realistic. There are many battles to fight that will only result in you losing it. One of the most important things to learn is to only take on battles that you know you can win. How do you figure that out? Well, according to Sun Tzu, the master battle strategist, the most important thing is to know thyself and thy enemy. If you understand these two things, you will win in every battle. It sounds so simple and yet most business owners don't really understand the competition or what their main strengths and weaknesses are. According to Sun Tzu, without this knowledge, you will lose very battle. If you gain some of this knowledge, you will win some battles and lose others.
5- A business owner must understand leadership.
A great leader will motivate the employees to do great things. For this to happen, there has to be a level of respect for the leader. The employees must be moral and follow strict rules. The enforcement of the rules should be done quickly. In addition, feats of bravery and strength should be rewarded quickly and openly. These are some of the basic tenets of great leaders.
According to Sun Tzu, the highest form of leadership is to first: Balk the enemy's plans. And Second: Prevent the junction of the enemy's forces; and third: Attack in the field and fourth: Attacking a besieged city. There is so much that can be said about each one of these leadership principles.
Planning the Strategy
It's impossible to tell you exactly how to build your strategy. However, there are three most important points you must follow.
1- The most important thing is to get proprietary intellectual advantage.
2- The second most important thing is to understand your competitor and yourself.
3- The final point is to fight in battles you know that you can win.
If you follow these points, you will be on your way to a great business plan.
The truth is that about 90% of small businesses fail. There are multiple reasons for the disasters. An important and not so obvious truth about all these failures is that the failure starts in the planning process. The battle is won in the mind before the game even begins. So, how do you create a master plan that will give you a great chance of success? The beginning, of it all, is to understand strategy.
Business Strategy Rules to Live by
1- A business owner must gain proprietary intellectual property.
Selling a commodity is nearly impossible to make a profit on. And, small businesses can't compete on price against large rivals with superior purchasing power. Since consumers are so price motivated, the small business must find a way to innovate. The innovations do not have to be large or "earth shattering". Innovations can also be small. For example, you might discover faster ways to organize your materials than your competitors or see a way to do something cheaper and better. Holding onto these good ideas and protecting them will go a long way towards long-term profitability.
2- A business owner must understand short-term thinking.
If you study game theory or the prisoner's dilemma, you learn that people always go for the short-term strategy. Some strategists point to long-term win-win scenarios, but these strategies rarely, if ever, play out as planned. Instead, people are always looking to get the best advantage possible. This results in short-term thinking. What a business owner must realize is that their employees, their suppliers, and their competitors will do what is best for the short-term. It's sort of like Keynesian economics. Take care of the short-term and the long-run will work out. Of course, this type of economics also states that in the long-run we're all dead.
We can always come up with reasons why long-term planning is best and even look to a few examples of it being applied correctly. However, the science of business proves short-term thinking works and that it is prevalent within companies and individual motives. In other words, put this into your planning process.
3- A business owner must understand deception.
There are many ways to interpret the word deception. It does not mean you have to lie, cheat, and steal. Instead, it might mean finding ways to hide your secrets from competitors. It might mean managing employees in ways that they do not know enough to compete with you. It could also mean that you use clever ways to gain proprietary intellectual advantage. One example of this would be to use spies. Large companies are adept at using spies. How many times have you seen a competitor hire an employee from another company for the sole purpose of learning what they know? This is common practice. Everybody is trying to do the same thing. The people doing it best win!
4- A business owner should only accept challenges they know they can win.
Many business owners are pretty cocky. They think they can compete with anybody and that they can do anything they want. This is not realistic. There are many battles to fight that will only result in you losing it. One of the most important things to learn is to only take on battles that you know you can win. How do you figure that out? Well, according to Sun Tzu, the master battle strategist, the most important thing is to know thyself and thy enemy. If you understand these two things, you will win in every battle. It sounds so simple and yet most business owners don't really understand the competition or what their main strengths and weaknesses are. According to Sun Tzu, without this knowledge, you will lose very battle. If you gain some of this knowledge, you will win some battles and lose others.
5- A business owner must understand leadership.
A great leader will motivate the employees to do great things. For this to happen, there has to be a level of respect for the leader. The employees must be moral and follow strict rules. The enforcement of the rules should be done quickly. In addition, feats of bravery and strength should be rewarded quickly and openly. These are some of the basic tenets of great leaders.
According to Sun Tzu, the highest form of leadership is to first: Balk the enemy's plans. And Second: Prevent the junction of the enemy's forces; and third: Attack in the field and fourth: Attacking a besieged city. There is so much that can be said about each one of these leadership principles.
Planning the Strategy
It's impossible to tell you exactly how to build your strategy. However, there are three most important points you must follow.
1- The most important thing is to get proprietary intellectual advantage.
2- The second most important thing is to understand your competitor and yourself.
3- The final point is to fight in battles you know that you can win.
If you follow these points, you will be on your way to a great business plan.
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