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21 min read

Episode 15: What is Your Business Strategy?

Episode 15: What is Your Business Strategy?

In this episode of The SME Growth Podcast, Dave Parry and Richard Buckle discuss the concept of a business strategy. Learn more about different frameworks to develop your business strategy, including lessons learnt from real life examples from our SME clients. This podcast is the perfect pairing to our previous episode on vision, you've established where your business is going, now it's time to work out how to get there.

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REad the transcript

Please note: Whilst all transcripts are double checked for accuracy, they are transcribed via Otter.AI so may contain errors.

David Parry 00:49

 Hello, you're listening to The SME Growth Podcast from Wellmeadow, and I'm Dave Parry and I'm joined this week by the famous Richard Buckle

 Richard Buckle 01:11

Croissant eating Richard

 David Parry 01:12

Croissant eating Famous Richard Buckle. Yes. Now what we're talking about this week, a natural follow on really from last week. This is probably a pair of podcasts that we've been planning some time. So last week, we talked about vision and what that's all about and vision statements and the vision process. And the follow on from that is strategy. We talked actually last week, didn't we that vision is really there to guide the strategy. But strategy is a different thing. So what was most one of them? What's the strategy for?

Richard Buckle 01:41

Well, it's just yeah, I think outlines how you're going to get to where you want to get to. So obviously, previously, you kind of need the vision first. Otherwise, the strategy and strategy is a little directionless. Yep. And I think you know what I mean, one of my pet peeves is I think people think that by putting the word strategy after something, it automatically makes it

David Parry 02:05

elevates it, it's really important project. Yes. 

Richard Buckle 02:09

And so it's, I think, probably one of the most misused words in business.

 David Parry 02:13

There's lots of different definitions. If you go online, you can get yourself confused. So pick your own one, pick what the flavour is, the one that struck a chord most with me, I think is that it puts the onus on you to recognise what your strategy is, by describing a strategy is a connected set of coherent decisions that you take in order to achieve some longer term goal. So it's not necessarily something that just happens to you, you can't drift in a strategy, you've got to make conscious decisions, and one on its own is probably not going to be enough, it's probably going to be enough that are joined together. So something around recruitment, something around product development, something around your marketing, somewhere around your financing, and funding of the business. But collectively, they come together to form a coherent strategy, because we're going over there, over there is somewhere different to where we are now.

Richard Buckle 03:01

Do you know where the word strategy came from?

David Parry 03:03

You know, Richard, I do not know. But I've got a sense that in a few minutes, I will know you will know.

Richard Buckle 03:08

So the word strategy came from the word strategeum, I think, which was the name of a Greek general in a battle. And he would stand on a hill and see what was going on on the battlefield and then direct what was going to happen using flags and things like that, to wreck the troops that were actually in the battle. So I think that's an important thing to link into strategy to say you've got to it's a fluid thing. In some respects, there's, there's got to be a bit like, maybe a bowling ball going down. And if you're like me, you need to have the the bumpers, the bumper guides, that's what the strategy is there for is to you know, you know, the balls got to hit the pins, it keeps it on track, you know, the balls heading in the right direction as it were, but it might bounce around a little bit. So yeah, so that's where the strategy comes from.

David Parry 04:04

Right? Well, there you go. I've learned something new today. I like this idea now of the Managing Director of Business standing on the balcony overseeing the the workforce raising the flags 

Richard Buckle 04:15

You're on the dance floor or the balcony, isn't it? From the nightclub days?

David Parry 04:20

Yeah. Well, and so many metaphors around the the conductor of the orchestra, you know, some playing to what's happening reacting. So there's certainly we talk in a minute about environment scanning, knowing what's going on, you got to keep your eyes and ears open, got to know what's going on, because that's a key input to your strategy. But so is the vision. So you're gonna know where you're trying to get to. So we use sailing metaphors quite a lot because we do a bit of sailing, you want to go somewhere, but if the winds not blowing the right direction for that, if it's coming straight from the direction you go out and you've got attack to get there. So you've got to choose how to react but then you know, so it might get in the way or there's some shallows or the wind changes direction or the storm, you got to adapt. It doesn't change your vision, you still want to get to over there. But you got to adjust.

 Richard Buckle 05:02

I went sailing with Dave once.

David Parry 05:04

And you are still here to live to tell the tale!

Richard Buckle 05:08

That's that's a whole other podcast, maybe with some trauma counsellors. And as I relive, the memories

David Parry 05:15

We got through alive and you didn't even get wet, did you?

Richard Buckle 05:19

I was below deck at the time, I had said my peace, I think I had I think my wife was eight months pregnant with my

David Parry 05:31

Not with you I stress at the time she was over there. She didn't know what you're going through.

Richard Buckle 05:35

It was her birthday weekend as well I think.

David Parry 05:37

That's more brave that coming on a boat with me! Anyway, all right. So that yeah, sailing metaphors. It was just a bit lumpy, shall we say, bit wind over tied. So yeah, different types of strategy. Now, you often hear, once again, you said it earlier attached to a strategy to anything and people imagine they're talking at a much higher lofty sort of area. And you hear about business strategy and transformational strategy and what sort of thing and great as long as you get value from those definitions, if that means something to you, and helps you to organise your thoughts, that's fine. For me, it's a bit simpler in that either there's the the overarching business strategy where it all comes together, which we'll talk about in a board maybe, or there's the components of that in each of the main departments in business. So you may have marketing strategy, your sales strategy and HR strategy and operations strategy. They're still okay. But they've got to feed into the business strategy. And just so happens that that business strategy may be, let's get better, or we do. Or it may be, let's go and set up shop in another country or develop a new product or acquire a competitor, you know, they're all perfectly valid business strategies, they just may be more customer focused more people and process focused or more technology focused, but it's still a business strategy.

Richard Buckle 06:59

And I suppose the size of the organisation is going to dictate who's involved like so the smaller company is maybe you've got a couple of different hats you're wearing in terms of different strategies. So often, you might see sales marketing combined, or operations and HR combined or something but the larger an organisation gets, the more that those individual strategies sit with individuals, it is about how do you bring everybody together to make sure that all of those individual strategies are actually aligned.

David Parry 07:27

And that brings me to think who of the top team needs to be involved in coming up with a strategy, because it should be all of them. And it should be the board, it's the board that's driving the business, all directors have a responsibility, one of the key four responsibilities of directors of the board. But there's probably a health warning in that, in that some directors are more by their very nature, inwardly looking than outwardly looking. And there's a danger of that balance isn't right. Or if the leader doesn't use that imbalance to great effect, then you end up with a very inward looking strategy. And it can be that people then focus on the marketing strategy is let's develop a new piece of software or come up with a new brochures and the operation strategy might be let's just replace that machine, not necessarily taking you to a new place, or getting you to that vision. So you just got to be careful, I think, in a strategy session, that you've got enough people prepared to speak who are outward looking, as well as probably the majority that are inward looking.

Richard Buckle 08:33

Okay, so are there any particular ways that we can talk about?

David Parry 08:38

Well as loads of models out there, and one that a good friend of mine, Tim introduced me to a long time ago was, I remember it as the "Where are we Going to Play, how we're Going to Win" book. But actually, the book is actually called "Playing to Win: How Strategy Works:". And that's written by Roger Martin and A.G. Lafley. about their experiences of working together some time ago now. But I think it was Procter and Gamble that we're working with. And it talked about how they use these philosophies of thinking. It's quite a good technique, actually, we put it on a poster to use the whole post it trick on with him. But it gets you to think of what are your options strategically for the way we're going to play? And then ask you what assumptions would have to be true for that to be the best option, right? Then you go through those assumptions and ask yourself, which is the least likely of these assumptions to be true and test it. And it's a very quick way of discounting all the ones that aren't worth doing or shouldn't be doing. So it was really interesting technique, and we've used it with a number of clients to good effect. The health warning on that one is that it's not applicable in every situation. It's great if you're looking for that type of not necessarily wholesale change, but big step strategy are stepping out into a new place. And you know, where else can we play and how are we going to win there? And several strategies are more Local, if you like in terms of how you do it, so you don't always need that approach, and sometimes it falls flat on its face feels a bit dry. But it has been used to great effect. So that's what I like. Yeah, I like that one.

Richard Buckle 10:09

Another one Good Strategy, Bad Strategy by Richard P. Rumelt talks around having that diagnosis, which I've always really liked that kind of real, honest, honest assessment of what's going on around here. I think sometimes it's too easy to think about strategy, again, is that kind of like aspirational thing, rather than actually getting rid of warts and all with it? Like, if there is a problem, we need to fix it? Yeah, have that kind of, you know, we want we know that we want to get somewhere. But to get there, we've got to change some things. So be really honest about that diagnosis. And then he talks about having guiding policy, which again, kind of like links back to the vision a little bit with that core ideology that we talked about last week, around purpose and values in it, what is it that's going to dictate our strategy? Are we going to do anything to win? Or have we actually got some principles here that we're going to, we're going to abide by?

David Parry 11:06

Yes. Which, which I think follows through whichever technique you use, you've got to make sure that your strategy is consistent with the elements of your vision. We talked about the values and the purpose and the goals and, and the vivid description when we talked about vision last week. So that's, that's embodied, then isn't it.

Richard Buckle 11:22

The third bit of the model is around a coherent action plan. Which is, you know, you can't just do stuff, doing stuff sake. And we talked about that I think about you know, people just want to put their foot on the accelerator and do things. And certain personality types are going to be more attuned to just let's just get stuff done within decent things. You've got to make sure you're doing the right thing. It's got to be clear and lining up with.

David Parry 11:46

Well, I think that's why I like that, when we opened up this, this podcasts with what's the definition of strategy, that coherent set of connected decisions to achieve a long term goal that that's exactly where he went to wasn't it, Rumelt. I think the other one, which everybody will be familiar with, but probably have a horrible memory of is a SWOT analysis. And I want to put a bit of a defence in here for the SWOT analysis, because it's so ubiquitous, everybody can cope with it. Conceptually, you don't need to have read a book like those other two examples, we've just given in it Strengths, Weaknesses, Opportunities, and Threats. But it's so often done so awfully, but I can imagine most people writing it off as a valuable method. So here's, here's our take on it, and how we tried to make it not so awful. For a start, definitely split out the SW with the OT. Strengths and weaknesses are definitely internal things and opportunities and threats are external things. And whatever you do, don't get a piece of flip chart paper, draw a line vertically, and align horizontally to divide it into four corners and just write them down, stand back at the end of your morning session, smugly folding your arms saying There you go, roll it up and put it away to next year. That is not a strategy. It's good prompts. But if you go through, and we've got a series of playing cards that we made up for each of these areas, certainly around the strengths and the weaknesses, we use a number of headings for from an internal perspective, and this isn't always appropriate. But if you have any element of your strategy, which is going to be internally focused, then run through the various headings of of the components of a business. And ask yourself which of these aspects is that something which could impact our ability to achieve our vision? And could it be easy to do? How important is it? How good are we at doing it at the moment, and by having a 2 by 2 group with post its on, you can place them all around on the grid and, and quickly summarise the bits that you need to worry about. But perhaps more importantly, give yourself permission to not worry about those other things. So maybe you can't do everything need to prioritise and maybe your HR department screaming out for a new time and attendance system. And they claim that it's really strategic? Well, it may be but it also may not be. And only when you compare it to all the other things you might want to do, can you really get a bit of a feel for how it stacks up?

Richard Buckle 13:55

Well, it's interesting with those sessions, what tends to happen is the first sort of 10 cards or always end up as being you know,

David Parry 14:02

top right, most important and most important to improve

Richard Buckle 14:05

But by the end of you know, as soon as you start putting more elements in there of the business, then all of a sudden those cards, you've got relative kind of

David Parry 14:14

People want to go off the top right of the chart. So you end up moving everything else down a bit to make way for it, which is great. That means you're prioritising properly. 

Richard Buckle 14:22

And I think we generally about 100 cards.

David Parry 14:25

Yeah. And we've got I think the main areas are vision, strategy, structure, culture as a kind of the leading bits. And then the sort of the engine room bits as we call it, the people, the products, marketing and sales, finances, and systems. So they're the sort of nine areas that we use probably got 10-12 cards in each as a prompt, they're just questions to ask and bat around, but that works quite well. But I can't emphasise enough. That gives you a very internal focus. And it's a great way to start the day, because as we said just now lots of people on the board are by their nature, internally focused. That's what they spend all day doing. So it gets all that out the way gets gets that flushed out and on the board, and we can see how it fits.

Richard Buckle 15:03

Yeah, it's easier to relate to what's happening on your day to day. 

David Parry 15:09

And they may have already had discussions about each of those things individually. But now we get a chance to bring it all together. So that's the strengths and weaknesses. But then we do another one around the opportunities and threats. Now, this is much harder. And it needs people who are plugged into the outside world. And it's amazing how you get so much noise in the first part. And then so little in the second part, and often the only people speaking in the second part, usually the managing director, and maybe the sales director, and it's very hard to get the others to contribute. And yet, this is often where the most important strategy will come from an opportunity or threat. And you can't even start to have this discussion, unless you've got a very good environment scanning process, which may just be in head, you have to write it down. But you've got to be tuned in to environment scanning. So who knows what opportunities are out there, which competitors may be struggling and looking for a partnership, or even ripe for a takeover, or may just be moving into a different direction themselves, they want to know what other opportunities might there be to recruit a key talent or develop a new product or which customers are moving in a different direction, you've got to know what's going on outside the four walls of your business, which applies as much to the threats, you know, what regulatory changes are coming down the pipe as well, cultural changes in society and our customer base are happening is somebody else, taking away all of our employees, because a new factory is just opened up around the corner offering more money, all that sort of things.

Richard Buckle 16:32

Brexit

David Parry 16:33

Don't go there. But Brexit will put that under legislative changes and park that. Environmental changes, you know, there's and this is, as I say, often the bits where what people think of as strategy really start coming out, let's develop a new business unit over here developing new products over there, that wouldn't normally come out of the strengths and weaknesses analysis.

Richard Buckle 16:53

You've almost got to then create a culture or individually, have a mindset where you are, you're, you're gathering that information over time, haven't you? So yeah, it's quite hard to sit in a room and just say, right, this afternoon, between one o'clock and four o'clock, we're going to talk about the opportunities and threats facing our business in an abstract, kind of, here we go, everyone gets in, it's like saying, like, we're all going to have a meeting at two o'clock to get creative

David Parry 17:21

Be spontaneous! Now! 

Richard Buckle 17:24

You've got to have those tools around you to be able to do that environmental scanning on a regular basis, if it's not something that comes naturally.

David Parry 17:31

There's even one or two board meetings, I chair where there's an agenda item called environment scan. And people have saved up some tidbits they've picked up on maybe a competitor has released their annual accounts or someone's put something on their website or key person has moved, and they've spotted it on LinkedIn, that type of stuff, you hear a bit of feedback from a customer. So you gather those through the year.

Richard Buckle 17:51

And we have a Slack channel where we put certain bits, articles that we find that might be interesting, just try and find a repository somewhere centrally where you can put those little bits information and say, well, who's moving here who's doing this? 

David Parry 18:07

And maybe it's worth as a framework on this, considering the Porter's Five Forces models for those not familiar with that is well spoken about hackneyed old thing. But it's not a bad way of at least making sure you haven't missed a bit. So you know, competitors are the obvious one, what's everybody else doing where we are? But also what the suppliers doing? Are they looking to vertically integrate a bit more and moving in, is their buying power changing? And you know, how are they changing what they're doing? Your customers? Are they changing their attitudes, not just to other competitors? But are they changing to move away from your industry entirely is that is the boot on the other foot? What new entrants are there? Who else is coming in to your market that didn't currently exist, and maybe doing a completely different model? You know, Netflix coming into TV and film, for example, and not just someone else doing the same but doing it very, very differently? Disruptive new entrants. And then the substitute products, you know, the the competitive for the cinema being the restaurant type of thing, something else to do for your leisure time. It's not a competitor. It's something else instead. So. So for those who are not familiar with it, there's your quick round robin of the five Porter's Five Forces, but as another way of just framing your thinking about what's going on outside?

Richard Buckle 19:13

And is there anything around being proactive versus reactive with strategy?

David Parry 19:18

Yeah, I think most people would like to think it's predominantly proactive. They like to think that the strategy has come about because all the directors went off to a hotel one day and had a nice meal afterwards. And that was the strategy. But actually, an awful lot of strategy comes around reactively. But it will only become strategy if you spot it. So you've got that environment scan or you're aware of it, and you have the right moment to mention it. And then you make that connected set of decisions that were talked about earlier on, which help you to achieve some business goal around it. So if you've got some examples where a client of ours were approached by one of their suppliers that was going bust and offered to sell them the company for 10 pounds or whatever, if they took on all the debt, and they did but that was that was a decision they took you could either knew that that was just opportunistic. But actually that the the idea of taking on a supplier like them had been around for a number of years, they wanted to integrate vertically. So actually, it did make sense. And because they talked about it when, when the opportunity came, they were able to react. 

Richard Buckle 20:16

I think probably if you have a proactive mindset to a strategy enables you to be reactive, 

David Parry 20:16

You have to react to opportunities. We had a business that sets up a load of COVID screens when COVID came around, you know, because they had the wherewithal, they knew some suppliers, they designed a product and, and got it out there quickly, first market with it. So it's very reactive in the sense that no one planned for COVID Come along and create a market opportunity, but they're very good at taking advantage of it.

Richard Buckle 20:44

Well, I think if you've got that ability to, you know, if you've got a strategic mindset, that's intentional, it's a lot easier to be reactive in those situations, I think I see the companies that maybe don't take this stuff, so seriously, tend to drift a little bit more when opportunities come, they haven't got the finance the resource the time, all of a sudden these opportunities, pass them by someone else has capitalised on it, and it's gone. Yeah. So it is about I think having that intentional mindset.

David Parry 21:12

Another example where we've got a client that has a very seasonal business, and tends to have four or five months of the year that's quite profitable. And then seven or eight months of the year that they're trying not to lose too much. So that overall, they do well for the year. So one of their vivid descriptions in their vision was to make 12 out of 12 months profitable, and they call it the 1212 vision strategy, whatever. That's what we're trying to do. So they're always on the lookout for which market sector would be the opposite of their current high season, which happened to be the summer. And it wasn't quite opposite. But an opportunity came along to do something in health service sector, which has a very different annual cycle building up and peeking around the end of the financial year, around about April, March, April. So that worked perfectly. But it's only because they were looking out for where's the next thing up until then they've been thinking about Australia, because they got into the sort of seasonal thought, maybe but didn't realise that different industries work on different annual cycles took 

Richard Buckle 22:07

It took them a while didn't it, they had to be persistent 

David Parry 22:13

It's taken years to develop it. And now it's very successful. So yeah, good on them. So there we go. That's a good way of depicting, I suppose if you're using the SWOT type approach, and we do use this because everybody can understand it. But we just do it in a particular way with the grid, make sure we focus on the opportunities and the threats. And bring into that. And this is, I suppose the link to last week's chat about the vision, when we talked about the vivid description, that distinction between the where we are now the as is, and this vivid description of the future the to be? What's the gap? I know, each of those gaps should form a candidate project for your strategy, because you're not going to get there, you know, without doing anything. So put those in as well under the opportunities and threats. These are things that we can do to change our change the future,

Richard Buckle 22:59

then how do you go about deciding what so you've got, you know, you've got all these things that we've got post it notes everywhere? A wall full of posting post it notes you know, your strengths and weaknesses, opportunities and threats, things to improve internally, things to go and do externally. How do we

David Parry 23:16

We've touched on this earlier. And this has just worked a treat every time we've done it. And we've even used it in other arenas because it works so well. So I encourage everybody to look this up on our website and the resources page, just create a very simple grid on the wall big piece of flip chart paper with two axis on it. One is how valuable is it to do this thing? How much does it contribute to our vision, let's say. And the other one is, how easy is it to do quickly, easy, cheaply, whatever can we do. And then grab all of the top candidates from all the other things you've done, whether it be the vivid descriptions, strengths and weaknesses, review the opportunities and threats review or the way we're going to play how we're going to win or good strategy, bad strategy, bring all those ideas in, and one by one, try and put them on that grid in some sort of priority order. A bit like you talked about earlier, the way we did it for the strengths and weaknesses. They all bunched up to the top right as being worth doing and easy to do. And then you start getting a few that are now actually that's not we need to move that. And very quickly, you get a spread across that chart, draw a diagonal line to cut off the top right hand corner where you've got a manageable number of projects, pick for 4, 5 ,10 depending how big your team is. And it's just proven over time and time again, to be one of the most effective visual quick. Don't get any arguments about it. Everyone can can see Yeah, clearly, that's what we should be doing. And we need to deprioritize that.

Richard Buckle 24:35

And then once we've identified those projects that we're going to work on, prioritise them, got them there. What How did how did that get crystallised into reality?

David Parry 24:45

Well, you've you've been with me on so many times before where this has been a car crash because you leave the strategy session. Everybody thinks they've had a good day and they've agreed it and even if you've taken minutes and you've taken photographs of all the charts and so on. A strategy is often maybe one of the most important ones is like four words on a post it note. Yeah, and that's it. And we leave all probably with a fair view of what that means. But all you've got as a record of it is four words on a post it note. So you've got to expand that out some way. So we developed this concept called a project charter didn't mean the different sections on it 

Richard Buckle 25:18

So we take the project chances to to bring to life the the action on the post it notes? So that's, that's about right. Okay, we've identified this is something worth doing? So let's actually build a project around it. Let's work out. Okay. Who are the people that are going to be involved? Who's going to be the champion of this, you need someone normally on the board, or someone who's got some level of authority to actually own that push through and push it through? So what's the action plan? What resources do we need? What's the timetable for this? And actually, then review that I think the main thing that is once you've agreed that project charter, obviously, then that you've got to carve out the time for people to actually do the work on because this is normally additional to people's day jobs.

David Parry 26:00

Well, there's another podcast about that.

Richard Buckle 26:03

But then we try to review those project charters within a board meeting setting because that's actually if it's if it's strategic enough, the board should be having oversight of that project. 

David Parry 26:12

And that works. In lots of companies, other companies, we decide to do more of a quarterly review, and do either after or a different day from the board meeting, different frame of mind. But the important things about these project charters is they're short and sweet. They're one page maximum. I think we got a template on the website. And we've got that in the resources section. Yes. Yeah. If not, we need to put one up there. But it's just divided into, I think, six main sections. What's the objective of this project? What's the background to it? Who's the team? What are the constraints and goals? 

Richard Buckle 26:42

They shouldn't be more than a 90 Day project. 

David Parry 26:45

Yeah, each project is manageable, get it done, move on, within that 90 to 100 days. Yeah. And it's funny when you start looking at project plans. After a strategy session, how many projects are all going to be completed within three to four months of the session is a five year strategy, but we're gonna do it by the summer, you know, never quite works that way. So, that's a bit of a tour de force there on strategy, isn't it? What's it for? And how's it fit in the different models that we've used in the past prioritisation? And then we document it at the end? And by all means, review every year, but don't come up with a brand new strategy every year, you know, just the one you've got before and come up with a couple of new ones. And importantly, kill off some old projects that have either been completed or aren't quite as relevant, as maybe they once were. Excellent, good strategy. So have a look on the website for some of the resources around that the prioritisation matrix and the project charter. Well, there you go. That's the pair of podcasts on the vision and the strategy that could be useful for people setting out to do that type of workshop in the future. Good. Probably, probably about all we've got time for on that one, then. So you've been listening to The SME Growth podcast. Thanks a lot for listening. Please, like follow share our podcast wherever you get your podcasts from, and more importantly, tell all of your business colleagues that were here and that were worth a listen. And in the meantime, good luck with the business.

Further resources

Access our free worksheets including the Project Charter template to help aid your strategy session.

We also have a great blog post about how your marketing strategy can work alongside your business strategy, read it here.

 

 

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