To grow or not to grow, that is the question?
Over the years I have encouraged many businesses to look at growth. I have also encouraged others to maintain the status quo. Improving the way you are running your business to have more profit and be sustainable, is more important. Either way, every business needs to do things differently in this ever changing global economy, or face the consequences.
Making predictions about future thinking is always difficult, but looking into what people are thinking can be extremely valuable. There are many trends such as globalisation, an ageing population, mobilisation, technology advances and planned infrastructure.
By predicted the impact more successful growth can be achieved. Many trends can be predicted with a high degree of confidence, given your time and effort. Now is the time to look at where you can add value to the future. Future thinking is an imperative, http://goo.gl/gj2hHd.
After growing at a rapid rate, you may hit a plateau and find everything is getting too hard, the fun is diminishing. If you’re sure the economy isn’t the problem, but there is something you can’t come to grips with, you will start to feel the pressure.
I am not anti-growth but, can the world population keep growing and growing along with all the organisations needed to support it. There must be a limit to the population the earth can support. When this limit is reached there will be no need for more growth. Today we say if you are to gain more market share, in order to grow, then someone else has to lose it.
Growth is a big decision
A big decision business owners have to make is whether to expand their businesses or stay the same. Some are start-ups, some have been in business for years and some would like to be bigger, but the owners can’t figure out how to make the leap. There was once a saying that if you stayed the same, you were, in fact, going backwards.
Most people want their business to grow, but it’s not always easy? You need more employees, more money or different management skills. A business won’t grow very much without these three things.
As the business grows, so does the need for new skills, it’s about learning the skills required to manage a growing business. The skills are different in a home based business to when you have 5, 10, 20, 50 or more employees. You have to figure out how to manage more and more employees as the business grows.
Don’t be obsessed with growth. But you do need to decide what is really important to you, the business, your family, your hobbies and so on. With growth, something has to give. Success comes through focusing your time and resources on what you have a burning desire to achieve. You don’t have to grow for growth sake
Many business owners decide where they are at, is right for them and don’t want to make their business any larger. If that is what they want, then that is what they should do, as long as it is viable in the long run. Dedicated accounting software allows for real-time visibility on performance, growth and cash flow, are important to every enterprise, big or small.
The for and against early growth
The vast majority of businesses are micro-businesses and home-based businesses are where many begin. They are often one-person, or husband and wife businesses. When you are the ‘chief cook and bottle washer’ and you become sick or die, the business falls apart. This is because the biggest challenge with a micro-business is maintaining a steady stream of income until the business is ready to grow.
If there’s a problem, it always came to your attention, making growth a little tricky. You know people who would help you, but no one who could manage the business through a hectic growth cycle.
People sometimes have trouble because their businesses simply don’t make enough money to employ the right people and skills. With those who do want to grow, the ability to acquire the capital needed becomes perhaps the biggest issue. It’s hard to borrow money for an immature business or, unproven idea. Most lenders are adverse to risk and enterprises they don’t understand.
For many micro-businesses, there is never enough time or money to grow their business. Many have no time to think and act strategically as they struggle to find the time to do the necessary daily activities. Should you choose to maintain your current size of business, then it can be just as hard to implement new practices that will stabilise the business and put it into a profitable and sustainable position.
Those who choose to grow their businesses are able to put themselves in a better position to add value for an eventual sale of the business. It is also necessary to grow most businesses so it can run successfully without the day-to-day efforts of the owner.
Extreme measures may be required
You sometimes have to take extreme measures in order to do what’s necessary to start a growth spurt. Like making a commitment to do what it takes to get your marketing right, or to obtain the right amount of working capital. This may mean working longer hours until it is done. Outsourcing pieces of your operations where you don’t have the expertise or time can make growth easier.
It’s the people who are willing to do what’s necessary to grow that will have the biggest wins. Being in a micro-business is not dissimilar to buying a job where you have to perform. You can focus on what you want all day long, but if you don’t take action, nothing much will happen. If you maintain the status quo, you will never grow. You could also be inviting disaster created by competitive forces.
The traditional small businesses usually have 5 to 20 employees and management become more complex when you start to grow. This is because you move into a role of supporting or, supervising employees, which is something you may not be good at or want to do.
Be aware growth can come by chance
There are many reasons why a business may achieve growth by chance rather than remain the same size. With growth, you benefit from the economies of scale, which eventually lead to a greater profit. Some owners can unexpectedly become obsessed with increasing their profit growth to achieve some unrelated objective.
When one of your competitors goes out of business and you are able to buy the assets, you could be propelled into the growth stage. This is particularly so if your current assets facilitate increased capacity to grow.
Some business owners receive an inheritance out of the blue, or a lottery win and immediately invest to obtain growth. Unfortunately, this usually turns into uncontrolled growth which can lead to their eventual demise.
Unexpected growth in your target market can automatically fuel your growth
The products you have been working on for years could suddenly come into vogue and result in unexpected growth. This increased demand may have also been caused by movement in the business cycle. If you simply increase an existing product or service range, it can automatically cause the business to grow if other lines are not dropped.
Setting objectives to achieve economies of scale, improve efficiency or, allow for bulk buying can also fuel growth that is unexpected. Many business owners strive for optimal levels of controlled growth and profitability and in the process create automatic growth. This can provide the degree of security and stability you are looking to achieve.
Power and respect are desired if you aim to achieve growth with your ego in check. You may want to display leadership in your community or industry, but there are better ways than uncontrolled growth.
Sometimes a business suddenly wants needs or is cajoled into expanding the business to involve additional family members or close friends. Others are expected to grow and external pressures are exerted by a franchisor or investor.
What is ‘growth hacking’ ?
Growth hacking isn’t the nicest term. But it describes a new process for acquiring and engaging customers and prospects. It combines traditional marketing and analytical skills along with product development skills.
In the past, marketing and product development aspects of a business were often at odds. Where marketing would be spending money to acquire customers but couldn’t get any development resources to build something as simple as new landing pages on their website.
And on the other side, product development people would often build what they think customers want and that will attract new customers. They do it without deeply measuring and understanding the impact of their changes.
The concept of ‘growth hacking’ is a recognition that when you focus on understanding your market segments and customers and how they discover and adopt your products. You can build features that help you acquire and retain more customers, rather than just spending more marketing dollars.
What if you stay the way you are
Your first priority is to have a long hard look at how you run your business:
- The loyalty of the customer base you serve.
- How you propose to overcome frustrations and worries you may have.
- Your capacity to maintain your market share.
- How you propose to meet both yours and the family’s expectations.
People and businesses who maintain the status quo, never grow. Without growth, many won’t succeed for very long as competitors take up the growth potential. So without growth, some changes become necessary to avoid going backwards. Also, if you feel you should be getting paid for doing what you love, then it’s time to make some changes.
Businesses have a way of accumulating garbage as they grow which can become a crippling burden that impedes growth. Garbage comes in many forms, emotional, physical, old equipment and old ways of doing things. Something has to give as no matter how hard you try, no matter how committed you are, you can’t achieve if you keep hauling this garbage along with you.
If you feel as though the harder you try, the more difficult things become, then it is certainly time to have a good hard look at the business and yourself. Revenue growth is never as important as profit growth.
Understand why you want to stay small. Having satisfied yourself, clearly establish what is it that stands between the aspirations you have for the future and where you are now?
Make full use of the tools available to you
Today there are many tools available to help sole traders and micro-businesses to be more efficient, effective and to help them find and implement workable and practical solutions. If you want to be spending more time with your family and enhance your lifestyle then new approaches and actions need to be taken.
Should your business be struggling to show a profit and pay you a decent wage, you are certainly not alone. The only practical way, particularly in a tough economy, for most businesses to do well, is to either progress through continuous improvement or to find breakthrough strategies revolving around creativity and innovation.
What will make you stand out from the crowd if you’re not growing? Wishing and hoping will not turn things around, you need to apply your imagination, recognise the opportunities and become action orientated. Be very careful not to let your business be destroyed by the current reality.
If you choose growth
The big challenge presented with growth occurs when the various divisions of the business grow at different rates. A business may have $1 million in annual sales, but only have production capacity for $800,000, enough employees to handle $600,000 in production, a sales and marketing capacity for $500,000. Customer service only happens if there is time left over. Compounding this is trying to do it all with totally inadequate working capital to gear up each section of the business when and as required.
As the business continues to grow, problems can emerge and the business risks being wiped out by its own growth.
- Orders may stop being be met on time.
- Customers become frustrated with the lack of responsiveness.
- Equipment is not maintained properly.
- Good employees start to leave.
- Financiers start to get nervous.
With the business evolving, especially when it’s growing, you must make changes. What’s important is to determine where changes are needed most at any given time and a plan that focuses on the most critical first.
You have to learn new tools and techniques for running a larger business and crisis management becomes the order of the day. Fixing the same old problems over and over will put you on a downhill spiral. You have to learn to trust employees and other stakeholders, allowing them to make mistakes and address them.
Finding ways to take yourself out of the day-to-day operations of the business, without feeling guilty, is a big issue. New skills are required to monitor the overall performance of the growing business remotely and understand what is happening.
Sooner or later you will find yourself struggling to produce growth. Often it’s because your business models have run their course, or they’ve been overtaken by competition. You may have been hit hard by a stagnant economy, or a natural setback like drought, flood or fire.
When this happens, you don’t want to react in an unproductive way. Don’t scramble to imitate successful strategies launched by competitors. Some people will go for “game changers”, like acquisitions, or the introduction of new partners, hope it will change their growth trajectory .
Others double down on their most loyal customers on the theory that they can build on an already strong market position and emotional connection. And all too many try to work their way out of the problem by launching multiple growth initiatives with the hope that a few of them will stick.
Many businesses tend to underestimate opportunities for organic growth that are hiding in plain sight. Opportunities that will not require a large injection of capital. Strategic growth strategies, on the other hand, might give significant growth over the medium to long term but are much more expensive.
Setting goals and having a good Business Model, Business Plan and Budget is fundamental . This is always a starting point for developing any growth strategy, unfortunately, most have very loosely defined goals at best. As a starting point use the following strategy ideas to develop your own growth strategies.
External growth strategies get faster results but are far more expensive to execute. You could spend years developing a strong marketing team, or you could acquire a small marketing firm that already has the staff and necessary expertise. The latter approach requires substantially more money in the short term, which is why organic growth might be the best option for some small businesses.
- Capitalise your business ready for growth.
- Strategic Partnering.
- Invest in new product development.
- Implement new technology.
- Geographic expansion.
- Explore new markets.
- Vertical Market expansion.
- Grow new businesses from within the existing business.
- Mergers and Acquisitions.
Organic growth strategy involves strengthening your company using its own energy and resources. This approach to growth is slower than others. But it has relatively low up-front costs. It an attractive option for small business owners who want to grow but don’t have large amounts of liquid capital.
Developing your business’s strengths through organic growth can make you a stronger competitor. Continually devoting profits to improving your quality-control and offering better customer experiences, can improve your competitiveness.
Organic growth can also increase your market share and improve customer retention. Reinvesting your profits in your sales and customer-service helps attract new customers while strengthening relationships with your existing customers.
- Become more creative and innovate.
- Market segmentation.
- Identifying your ideal customers.
- Implement better content marketing.
- Ensure your business is Investor Ready.
- Improve your branding and positioning.
- Make better use of social media.
- Improve the customer experience.
- Analysis of your Value Chain for improvements.
- Improve distribution channels.
- Utilise new communications.
- Rework your competitive strategies.
- Become a leader in your community or industry.
- Develop and communicate powerful competitive advantages.
- Capture the most pressing customer wants and needs.
- Create a distinct value proposition.
- Implement a customer loyalty program.
- Cooperate in developing improved industry standards.
- Stepping out of your comfort zone.
The growth versus working capital dilemma
There will be many challenges to face while trying to grow. But for most, the biggest problem by far will be generating the cash needed to grow safely. You must continually focus on increasing you working capital and efficiently manage it, while ensuring profitability does not slip.
The dilemma has become quite acute these days since there’s been an expansion of available capital. Spending your way into growth is very risky, the more capital available, the more capital is raised, the more capital is spent, and the more capital is lost. Become financially savvy, http://goo.gl/5MfMnK.
The more money you raise to grow revenue, the less time you will spend on optimising your operation and improving your delivery. Always be aiming for organic growth and only spend more if you have a highly efficient and profitable operation.
Businesses losing capital in pursuit of growth or market share find themselves in trouble pretty quickly. You should be driving your business such that it operates within your working capital means and working on innovation to uncover more efficiency along with better products and services that drive growth and profit.
Are you about to raise more capital to fund growth?
Make sure you have the basic elements required to achieve capital-induced growth:
- Is the market big enough, make sure there are enough prospective buyers of your products and services to support your growth plans?
- Only spend more on acquiring new customers if your cost of customer acquisition is profitable. Figure out how to optimise your customer acquisition cost.
- Growing in leaps and bounds is much harder and more costly the bigger the business gets. Make sure to temper your growth projections and cost assumptions.
- There is a market advantage as the business grows, it becomes harder to deliver a competitive advantage, as you spend less time with prospects and customers.
Roadblocks to growth
In the beginning, most small business founders have their fingers in every aspect of the business, from making sales to cleaning the toilets. The problems start when the business starts to grow and the founder can’t stop being intimately involved in the detail. Everything comes back to them for approval and this predictably inhibits growth
What is the invisible force creating this giant obstacle that is preventing you from growing the business? Is it the type of business or industry you are in. Or is it the location and the size of the available market. Lack of working capital, poor marketing, can severely limit growth. It could also be you and your management skills and capacity.
Perhaps you have had a previous failure and are hesitant to make the right decisions or capitalise the business correctly. Security is an elusive goal, to find it you have to risk it. You can’t have the benefits without the risks.
It is important you evaluate your beliefs to see if they will inspire your growth or obstruct it. Even when you are aware of your values, the strong emotional component can make it difficult to change them. A belief in outsourcing can have a dramatic impact on positive growth.
You are convinced that no one can do things in the business as well as you can. The problem is, no matter how much you want to delegate, you won’t succeed if you have the wrong people around you, so hire carefully and take your time to get it right. In small businesses too much is lost because people are hired for expediency, or as a favour, not for their attributes. Take time to look at every job and be clear about the skills and personality traits needed to do it well.
Conflict is a show stopper
Becoming involved with people whose values are not congruent with your own. Of all the roadblocks to growth, internal conflict is the one that can sabotage your efforts without you even knowing what happened. If you haven’t taken the time to discover your values, you are vulnerable to disharmony and the associated frustrations.
You’re not ready or willing to change, let go and have others help you run your business? The best way to beat resistance to change is to practice letting go by focusing on positives rather than negatives and putting your energies into real possibilities. Embrace change for it is at the core of life and keep in mind, work is a thing you do, not a place you go to, so make the most of what you do.
I am often asked to help somebody grow their business. Almost invariably they start to tell me what they want to make in terms of income but, their current status is very vague, or unknown. Here is the roadblock they have, they can’t settle because they are confused. They have an income figure in their mind that will take three to five years to reach and expect to do it in the first year.
Many have no business Model, no Business Plan and no Budget. They only have a vague notion of the market they want to sell into and the marketing they will put into place. More often than not, they are short of the required working capital to get to the income level they want.
Steps in creating a growth plan
If you are committed to business growth, you will find the time and resources to work through the following steps and develop a growth plan . You will probably find the journey as valuable as the final plan document.
- Diagnose the health of your business.
- Focus on the key business functions and setting objectives.
- Develop your growth strategies.
- Implement your growth plan.
This will help if you don’t have any management experience and you just do things through brute force. As you develop your plan, it is important to remember they are for your business, not anyone else’s, The plan is to help you to resolve problems, do things more easily and better guide you towards the future.
“Growth is never by mere chance; it is the result of forces working together”. J.C. Penny
“The unsuccessful person is burdened by learning and prefers to walk down familiar paths. Their distaste for learning stunts their growth and limits their influence”. John Maxwell