Why do so many companies languish and watch as their business turns into a zero profit zone, while others seem to thrive?

When you look at your business, whether it’s a new venture or a company with a long history, can you answer following questions? •What does my company do better than anyone else? •What unique value do I provide to my customers? •How will I increase that value next year?

Companies that fail to answer these questions, and don’t believe they are of paramount importance, relegate themselves to marginal profitability at best and failure at worst. But companies that can answer these questions are able to raise value bar for their customers and reap benefits of success.

Of course, being able to answer 3 simple questions does not ensure success, but it is an important step in creating a strategic and focused operation which leads to a successful business. With today’s business environment being so competitive, businesses need to re-invent rules on which they compete in order to be successful. Companies like Wal-Mart have figured this out and have redefined competition in their market by delivering a unique value to a selected customer group. By maintaining a focus and discipline, they make it difficult for other companies to compete under old competitive terms.

Simply, competitive strategy has never been more important to success in today’s business environment. It does not matter what type of business you are in or whether you are small, big or just starting out, a company can not survive without an adequate and focused strategic plan to best competition. Yet many companies fail to execute a successful strategy; it is these companies that languish in zero profit zone.

In simple terms, for a company to achieve success and enter profit zone it must first decide where it will stake its claim in marketplace and what kind of value it will offer its customers. A company needs a clear marketing thrust, a precise knowledge of its customer base, and a product or service with a niche or some competitive advantage to be successful. Unfortunately, many entrepreneurs and business owners get stuck in process of defining their competitive strategy. They often have idea and product, but being technician they are not sure how to define its market. Even worse, many entrepreneurs assume or guess their target market and often glaze over a competitive strategy, usually to detriment of business.

So what are steps to laying out a competitive business strategy? While there are different methods you can follow, I have laid a series of 6 basic steps to help you.

1.Financial perspective

This step may not seem to have much to do with strategy, but it is important to determine value of success quickly. Why? Because, in simple terms if venture can’t deliver significant returns, it may not be worth risk, and you have to ask yourself if it is worth continuing with your business. In this scenario you complete a reverse income statement. You start by defining how much profit you want to see at end of a certain time period, and then determine amount of revenues needed to generate that profit and costs to deliver that profit. Do numbers add up and make sense? The goal here is to be objective, if expected revenue is not sufficient to generate your required profit at end based on an estimate of costs, don’t simply fudge numbers and assume you can reduce costs or increase revenue. Be diligent in your assessment.

2.Understand industry and competition

Marketing Inconsistently Once you have committed to owning and running a business you must be equally committed to marketing and selling products and services of that business. It is difficult, if not impossible, to stay and remain profitable without a commitment to ongoing concerted marketing. To get more out of your marketing, create a simple marketing plan that includes marketing activity every day, every week and every month. Marketing plans combine formal activities (such as advertising, promotions and writing) with informal activities (such as making new contacts) . Don’t underestimate power of talking to people about what you do. Use every opportunity, every time.

Fear of Asking for Sale Isn’t it true that we think asking directly for someone’s business means coming across as pushy or obnoxious. But if we have this attitude, we are letting profit-producing opportunities pass us by. Worrying more about what someone thinks of you than bringing more money into business is an all too common mistake. If you find it difficult to "ask for sale", you can be sure that you're not bringing in as much money as you could be. The most effective way to address this issue it to practice asking for sale in language that you are comfortable with (not too wishy-washy please). Write down what you want to say first, then practice it over and over. There is also plenty of stuff out there on handling objections. Prepare your responses to most common objections so you are well armed before you speak with your prospective customers.

Getting help Most business owners possess strengths in one or two specific areas, but whether by necessity or design, they often end up working in areas they aren’t strong in. This builds inefficiencies and potential for mistakes into business. To compound problem, we don’t ask for help straight away, but struggle on doing stuff we are not suited to (saves money right?) But each day that goes by with your business running at less than maximum efficiency, means dollars lost from your pocket. Work out where you add most and least value in your business. Pay someone to help you out with these low value add activities. Your time is best spent where you add most value. If you can do more of this kind of activity, your business will benefit.

Use your Existing Customer Base All research tells us that it is easier and cheaper to keep working with customers you already have, than to get new customers into your business. If you are not following up with past customers on a regular basis you are reducing your profitability potential. Develop strategies to keep your customers with you, such as loyalty plans, regular communications and special offers. Implement a regular process for following up your customers after they buy from you. Managing Expenses Savvy business owners regularly appraise their business expenses and find ways to reduce costs without sacrificing quality. If you haven't completed a cost analysis lately, you might be paying more than you need to be, which will reduce your profitability. Solution: At least once per quarter review expenses and negotiate for adjustments as appropriate. Categorize everything you spend under 3 headings: Essential, Nice to Have and Non-Essential. Everything in last two categories is up for grabs – be ruthless!