3 Effective Strategy Tools for Small Businesses

3 Effective Strategy Tools for Small Businesses

Many small business owners struggle to find enough time to manage the day-to-day demands of running a business – and delivering value for your customers is likely why you created you business in the first place, so it should be a top priority. 

Yet many small businesses don’t survive more than five years because of insufficient cash flow and customer demand. Often, your markets are unpredictable, the economy changes and your competitors innovate and fight for your market share.

To stay on top, you need a solid strategy. Good business strategy is about providing superior, hard-to-copy customer value. It’s about influencing the future, not reacting to it. You may not spend much time on strategic business thinking right now because it detracts from the day-to-day, but it may be exactly what you need to keep your business healthy over the long term.

Further, strategic thinking isn’t trivial and rarely offers immediate rewards. It forces you to go beyond your comfort zone and make decisions about your long-term competitiveness. As an entrepreneur, you have the ability to move quickly and change course, but your strategy must recognize likely weaknesses of limited resources and less-developed branding.

Luckily, there are many tools to help guide your strategic business planning. 


Your business doesn’t operate in isolation. In this analysis, write down on a sheet of paper 6 headings: Political, Economic, Social, Technical, Legal and Environmental.

Under each category, list all the factors that affect – or have the potential to affect – your business. For instance, a "political" factor with implications for your business may be a new funding policy related to your clients. An example of a "technical" factor would be the emergence of a new technology that reduces your operating costs.

To use this tool to help develop your business strategy, your starting point should be selecting and prioritizing a handful of factors according to their current or future impact on your business, along with your ability to respond to them.

2. Why Analysis

All businesses have problems. The successful ones recognize the causes, and prioritize the solutions strategically. You can use this approach to solve your, and some of your customer’s problems.

“Why analysis” takes a single problem and identifies the root causes. You can question each answer produced by your analysis up to five times to determine core problems. Then, you can prioritize the core problems according to impact and remedy. This simple example illustrates the reasoning:

  • Problem: Slowing Sales
  • Why are sales slowing? Because of a lack of quality sales staff.
  • Why is the quality of sales staff lacking? Because of inadequate training.
  • Why in the training inadequate? Because the sales manager is overworked.
  • Why is the sales manager overworked? Because there are too many customer issues outstanding.
  • Why are there too many issues outstanding? Because there is no after-sales process. 

In reality there will be multiple problems and causes. Solving a few key root causes will have greatest strategic impact.

3. Strategy Canvas

The Strategy Canvas asks you to identify the main factors in your current product or service offering that create customer value. For instance, a plumbing business may include price, time to respond, residential service and environment technology as factors. For each factor rate your product or service from 0 to 10. Now, do the same for key competitors or substitutes (such as DIY) and use the same factors. 

Your customer value strategy is about changing and redefining your offerings strategically. Start the process by eliminating or reducing some of the factors to reduce costs. You can improve some factors and add new ones to create better customer value. The Strategy Canvas requires a lot of thinking time, collaboration and research, but the results can really set your firm apart.

Others to Tools to Consider

The previous are just a selection of strategy tools you can use in your business. You may want to look at other tools such as SWOT Analysis, Porter’s 5 Forces, the Business Case, the Osterwalder Business Model Canvas, the GE Business Screen and the Balanced Scorecard. 

Turning Analysis into Action

Good strategy describes what you are going to do, and when and how you’re going to do it, along with the expected costs, efforts and rewards. As a business owner with limited resources, your strategy must recognize your ability to implement and fit with your values. 

By setting aside a few hours of strategic planning time every month, you may be making the best possible investment you’ve made in your business yet.


About Dan Hathway

Dan Hathway is the Principal of Hathway Management Consulting, which focuses on strategy for small businesses. Dan has over 20 years experience in SMEs and corporations. He has owned 3 businesses, held senior management positions and worked globally in a variety of sectors.