Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.
13 min. read
Updated January 4, 2024
There is so much you could do to grow your business. You could develop new business partnerships, build new features for your product, or add new products and services. It’s an ever-growing list of seemingly good ideas.
But you can only do so much with the time and resources available, and chasing the wrong thing can be incredibly costly. How are you supposed to know what’s worth pursuing?
By developing a business strategy.
A business strategy outlines what makes your business unique and how you’ll solve a specific problem for your customers. It helps you focus on creating value to solidify a competitive advantage in the market and reach your goals.
Creating a business strategy gives you a guide for making decisions that prioritize growth. A few use cases for your strategy include:
A good business strategy helps you:
With a business strategy in place, you’ll be better prepared to avoid chasing every new opportunity. It helps channel your efforts toward opportunities that align with your objectives.
Without a well-thought-out strategy, there’s a higher risk of wasting time and money, possibly leading to business failure.
A clear strategy keeps you and your team on the same page. It guides your collective focus towards specific business goals and ensures everyone moves in the right direction.
Investors need to see how you solve a problem in a way that differs from the competition. Your strategy explains that and shows how you’ll execute on your idea.
Your business strategy doesn’t just take your customers into account—it also forces you to understand your competitors. You’ll understand how you compare and what it will take to grow beyond them.
When developing a strategy, keep it simple. Focus on the needs of your customers and the value of your business. Here’s how:
Tip: Download our free one-page business plan template. It provides a simple but effective format to document your business strategy.
You shouldn’t take action without understanding your customers’ needs. Read reviews, conduct surveys, dig into forums, and—most importantly—talk to your customers.
Whatever you do, collect real-world data and develop an understanding of your target market.
Now, you need to document your results. Add enough information for you, and anyone else, to easily understand:
Don’t go into too much detail here. Just have enough information to paint a picture of your ideal customer.
If you have created a business plan, you should already have a profile of your target market. For this step, revisit your information and determine if it is still relevant and accurate.
The crux of your strategy is the distinct value your business provides. The research and information you’ve documented will make defining that value much easier. By the end of this step, you will have brief descriptions of:
These will be brief but powerful statements for your business. It’s where you define what you do, why, and how you do it better. They’ll drive your strategy and help turn your customers’ needs into memorable statements that you, your employees, and even potential investors will focus on.
Tip: If you’ve written a business plan, you don’t have to start this process from scratch. You likely already have the components or even entirely written statements in your Products and Services and Sales and Marketing sections to use.
In a sentence or two, outline the critical problem your target customers face.
Example: “Most local consumers lack access to fresh, organic bakery options that support health and community sustainability.”
Briefly describe how your product or service addresses the problem identified.
Example: “Our bakery offers daily-baked, organic bread and pastries using locally sourced ingredients, providing a healthy and community-supportive alternative to mass-produced baked goods.”
Your value proposition is a clear, concise statement explaining:
You can use your descriptions of the problem and solution to help define the key product/service benefits in your value proposition.
List what factors set you apart from the competition. Hone in on a theme for both that resonates with your customer’s needs and preferences. Then, combine these ideas into a single sentence.
Example: For a local organic bakery focused on quality and healthy eating, your value proposition might look like:
“Enjoy fresh, organic goods baked daily with locally sourced ingredients to support your health and community sustainability.”
Understanding your competition is crucial for carving out your unique space in the market. Here’s what to look for:
Like your customer research, you don’t need to be overly detailed here. You want a simple summary of the competition and why you’re different or better than them. That should provide enough information to help with the final step.
Example: After checking out the competition, you realize that your bakery offers far more gluten-free and vegan options (and they taste far better). You’re also planning to offer delivery services, which current bakeries in the area lack.
But what if your business provides a solution that isn’t drastically different from competitors? It’s a fairly common situation, and you may struggle to immediately identify how to set your business apart.
If this sounds like you, then you’ll need to focus your differentiation efforts on:
All of which we’ll cover over the next three steps.
The sales channels you choose and prioritize should be based on the needs of your target customers.
Focus on that last question if you’re trying to differentiate through your sales efforts. The biggest opportunity may simply be to better serve the purchasing habits of customers instead of offering a fully unique solution.
Let’s revisit our bakery and assume you plan to open a physical storefront. That’s one sales channel—customers make purchases in person. Your competitors also do that, but maybe the location you choose is more convenient and accessible to people on their morning commute.
As previously mentioned, you also plan to offer your baked goods through 3rd party delivery apps—another sales channel.
Sticking with that idea, you realize that online ordering is a very attractive benefit to your customers and that most competitors don’t have an up-to-date website. So, you decide to offer online ordering directly through your website.
Other sales options you consider include distribution through local grocery stores and bulk catering contracts. For the purposes of your strategy document, you’d list off these sales channels based on how you’ll prioritize them and end up with something like this:
How will you spread the word about your business?
Will you take out traditional ads in newspapers and on billboards? Focus on paid advertising through Google search or Facebook? Maybe branch out and partner with influencers?
Whatever you choose, focus on marketing activities that get you in front of your customers. There’s no reason to invest money in places where your customers aren’t spending their time. If you do, you’ll struggle to see any real return on marketing efforts.
Now, that doesn’t mean you just replicate what your competitors are doing and do the same marketing activities. They may not be the most effective or targeted efforts. In fact, by taking a different approach, you could differentiate your business through the channels and messaging you choose.
You notice that most of your competitors’ marketing consists of billboards, flyers, and similar out-of-home awareness efforts. They don’t market much online or try to directly connect with customers.
You believe that your target customers appreciate a more personal approach. So, you split your efforts and try to build a connection through complimentary digital and traditional marketing efforts.
You send direct mailers providing regular incentives that also feature your Instagram. Then you create regular posts showing how your baked goods are made and previewing upcoming treats—which can be repurposed for online ads.
This approach, compared to your competitors, is far more interconnected. Each effort promotes and bolsters the rest—potentially leading to more consistent messaging and cost-effective creation.
Your business model describes how your business will make money—covering where revenue comes from and your expenses.
But, did you know that your strategy can be focused on innovating with your business model?
You don’t need to invent a fully new business model either. Instead, focus on identifying ways to optimize:
You’re not trying to break the mold with how you make money through your bakery. However, you have identified a few ways to make your business model more profitable.
First, you found local suppliers who can provide high-quality ingredients but are far less expensive to acquire due to a lack of shipping costs. Your expanded sales channels also provide far more options for customers to engage and purchase however they want.
And since your products are of a higher quality, you’re positioning them as a premium option. However, due to your cost-saving efforts, you’ve been able to keep prices relatively close to competitors and even have the flexibility to go lower if needed.
If you’re just putting your strategy together, don’t focus on going too in-depth with your number crunching. Instead, describe your business model by simply listing your revenue streams and key expenses.
Once you have a business model that you believe will work (and have ideally tested it with customers) then create detailed forecasts to make it usable.
Clarify your value, target the right buyers, and understand how to reach them meaningfully by asking three simple questions.
The process above helps you create your business-level strategy. However, there are ways to make your strategy more actionable.
Transitioning your business strategy into functional tactics is essential to achieve your business goals. While your strategy sets the direction—tactics detail the operational steps and day-to-day activities necessary for execution.
Example: One of your differentiation strategies is to provide greater customer service than your competitors. You need to enhance customer satisfaction, which may translate into tactics like implementing a feedback system or training staff in customer service.
Successfully implementing your tactics requires setting clear deadlines, identifying and addressing potential bottlenecks, and adjusting processes. Remember, you want every tactic to contribute to your long-term goals. If you find that work isn’t aligning with your strategy, it likely isn’t worth prioritizing.
Tactics and specific details make your strategy actionable. You’ll struggle to achieve consistent growth if you fail to understand how these three things work together.
The entire point of developing a strategy is to ensure you are making progress toward the growth of your business. Even if you’ve worked through all of the steps we’ve outlined here, you will struggle to make any real progress without tracking and evaluating your performance.
The metrics or key performance indicators (KPIs) you focus on measuring fully depend on your strategy. You should at least track revenue growth and cash flow. These will provide you with the basics for understanding the health of your business. The rest is up to you.
Are you focusing on bringing in customers? Track your customer acquisition costs and retention rate.
Looking to improve brand visibility? Retention rate, market share, and Net Promoter Score may be useful options.
In any case, know what you need to track and set up a way to do so as early as possible. Regularly reviewing these metrics provides insights into whether your strategy is working. The longer you go without knowing what demonstrates success, the longer it will take to execute your strategy.
Engaging key stakeholders early provides unique insights that can lead to a more well-rounded strategy. It also helps foster a sense of ownership and trust between you and your employees.
You don’t need to share it with everyone in this early stage—but collaborating with the right people can streamline your efforts. You’ll avoid misalignment between individuals, teams, and the business. Plus, it can lead to discussions and ideas for applying the strategy to smaller projects and goals.
Your strategy won’t be perfect. Even if you follow these steps to the letter, unforeseen circumstances, changes in the market, or any number of things will force you to adjust.
The key to a successful strategy is to pay attention to your performance and change course when necessary. Your strategy cannot be static and isolated. If it is, you’ll struggle to grow as things change.
If you’re looking for a tool to help you document and review your strategy—the one-page business plan is a simple but effective option.
For something more flexible and long-lasting, we recommend LivePlan’s Growth Planning process. It turns the concepts described here into a living 4-step system focused on business growth.