The 5 Fundamentals of Building a Successful Business

Often the simplest changes can help you succeed in business. In fact, to make sustained growth more likely, small businesses need a smart, strategic plan. Whether a company is in its infancy or has been around for years, there are a few things every savvy small-business owner needs to keep in mind.

1. Identify your customers

It’s important to share the word of your business when you start out and as you grow in order to maintain a customer base. But instead of the cast-a-wide-net approach, try something a little more focused, strategic and rooted in research. Invest in market research—which you can either hire consultants to do or informally conduct yourself—to best identify who your customers are, then compare that data with who you would like your customers to be. From there, you can make an informed decision about where and how to reach them and launch a marketing initiative with a better chance of yielding a return on your investment.

2. Visualize success

Do you see your business successful? You hear people talk about their dreams, but I don’t like that word in this context. I do agree that is good to have dreams, but don’t confuse dreams with visualizing business success. When you are visualizing success you are doing more than daydreaming. You are actually thinking about ways to get there. Dreaming is passive while visualizing is active. Picture what it would look like to reach your next goal. Do you want to get 100 new clients in the next six months? What would your business look like with 100 new clients? How would it impact the way you do business? How many people would you need to hire? Would you need to manage your company differently? Will you need more capital? Visualize your goals and think through possible scenarios.

3. Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV)

CAC tells you how much it costs to acquire a new customer. CAC is essentially your cost of sales and marketing. If you don’t understand this number, you can’t justify spending on sales and marketing. CLV is the profit attributed to the entire future relationship with a customer.

We use the CAC and CLV in conjunction. For example, if your CLV is $300 per customer and your CAC is $600 your business is in trouble because you are spending twice as much as you are earning. Your CAC must be less than your CLV if you want to stay in business. In the above scenario, you either have to increase your CLV or decrease your CAC.

Understanding the relationship between your CAC and CLV is crucial. Both are real numbers with an actual dollar value you can measure. The numbers may change over time and as they do you will be able to make the necessary adjustments.

4. Emailing your prospects and your current and past customers

Email marketing offers a simple and cost-effective way to communicate yet most businesses continue to ignore it. Sending one or two emails here and there is not enough. Proper email marketing is about staying in touch. The most effective tool to stay connected is email. You should email your lists at least once a month. Depending on your industry or the seasonality of your business, you might need to adjust the frequency, but the key is to email regularly.

There are at least three groups you should email; your prospects, your current customers, and your past customers. Your prospects may not yet be ready to become customers, but you must continue to engage them. Educate them about your products or services, provide customer testimonials. Think less about selling and more about providing value through guidance, training, and education. As a direct result of email marketing, your prospects will view you as an authority instead of someone who is simply trying to sell something. Your current customers may be interested in a new product or service you offer. You can also ask their feedback to improve a product or service.

Email your past customers to let them know what’s new. Have you introduced a new product or service? Have you made improvements? Offer incentives to encourage them to return or to refer others. Maintaining contact through regular emails with your past customers gives you a chance to stay top of mind when they are ready to buy, again.

5. Manage your cash

Even successful business go bankrupt. When you run out of money your business dies. It’s that simple. With cash in the bank, your business lives for another day. Managing cash is one of the most difficult tasks entrepreneurs deal with. You spend too much you run out of money. You spend too little, you miss opportunities for growth.

Do everything you can to avoid being surprised when you don’t reach financial goals. Set realistic expectations, and have a clear plan on how to get there. Undershooting your revenue estimates will help ensure that your plans, which are based on how much money your business makes, won’t derail the company. If you aim high and fall short of reaching your expected margins, it can be disastrous to your firm.