Managing your small business depends on the characteristics and methods of you as an entrepreneur. Reactive versus proactive small business management could spell the difference between failure and success.
Are you reactive or proactive when managing your business? In order to address this question, we need to discuss and differentiate reactive from proactive. Being reactive or proactive is not just a mind-frame, it is also a potential business strategy depending on what the situation calls for.
Reactive is when you react to situations affecting your business. For instance, say your competitor lowers the price of their goods. Your natural reaction is to cut down on prices too. This may seem like a viable solution at first, but reacting to situations the same way at all times may not the best solution for your business. As a matter of fact, applying similar solutions to recurring situations such as dealing with competition or slow sales could be fatal. For instance, if you keep lowering the price of your goods to cope with the competition, you might be forced to lay-off some employees in order to trim down cost of sales, causing your business to be undermanned in the process.
Proactive, on the other hand, means taking steps to maintain the business for the long-term. It demands that one should analyze the situation thoroughly and then identify alternatives that are best suited for the organization. For instance, if the competitor lowers the selling price, that doesn't mean you have to lower the price of your products too. Instead, you can opt to offer more features or perhaps better after-sales services. If you know the strengths and weaknesses of your organization, there is no need to react quickly to changes in market, competition, sales and other factors.
Six Steps for Managing Your Small Business
1. Understand the financial statements of the business
2. Know what external and internal factors could affect your financial statements
3. Communicate with your employees
4. Delineate accountabilities and responsibilities to individuals and departments
5. Align priorities with the organization’s goals
6. Train your staff in decision-making
There is a marked difference between reactive versus proactive small business management. Proaction allows you to react to situations and effectively handle them as well.
Becoming Proactive Rather than Reactive
Knowledge is power they say, and this is no different in business. Arm yourself with information. This information will enable you to make informed decisions rather than quick guesses. Don't leave anything to chance–the future of your business is at stake. Knowing the performance of the business including current performance, past history, and the future forecasts for the business are essential.
Keep in mind you'll need to know about more than just the performance of your business. You also need to know the factors that contribute to the success of your business. When you know these factors and monitor them, you can prioritize your business strategies and act accordingly. It's easier to determine which tasks or projects are needed first. By watching for these factors, which can include your industry, economy, market, competition, customers or clients and suppliers, you'll know what to expect. The problems caused by external factors are harder to handle when they're unexpected.
Every business should create several options to keep them on track regardless of changes that might occur.These options should strengthen the core competencies and minimize weaknesses. These steps will allow you to manage your business proactively. Being proactive allows you to respond to potential situations, thus eliminating problems before they occur.
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