Business Growth
All businesses start out offering a product and service that a customer will want to buy. Once the first Invoice has been dispatched, what then? All businesses want to continue to sell their wares and they want to sell these wares with a margin so that the business can continue to survive and grow.
Ultimately that margin ensures the future of the business for the life of the business. So what is the life of the business? Owners have their own perspective of what that means. Some will be interested in the development and growth of the business to pass onto future generations. Others see the end game as growth to a point where the business is sold, the owner(s) profit from the sale and then move onto the next idea. The final group has no real ambition other than to use the business as a hobby, to develop ideas and maybe stumble upon a business formula that may lead to a significant legacy.
No matter what the business endgame is, all businesses starting from scratch go through the same stages, each stage having its own challenges. These challenges require focus and specific skills from the owner for the business to prosper and grow.
The four stages of growth are:
- Start Up
The significant focus here is the customers, products/services and how these will get to market. The owner does all the work, or directs a couple of employees. Generally, systems are simple or non-existent. The risks during this stage is the business idea runs out of steam, the products/services have no perceived value and/or the owner, having devoted all their time to the business, runs out of energy. Each of these challenges, if not addressed, will sound the death knell for the start-up. Alternatively, the business survives and moves on to the expansion stage
- Expansion
Having survived to this point, the business model and the products have been successfully proven. The focus then moves to expansion. While cash flow is critical at all stages, during the expansion stage the competition of revenue over costs stands out; the business needs a positive cash flow. As an example, to meet customer’s requirements, people are employed, systems are introduced and delegation & planning becomes important. Each of these imperatives adds cost to the business. They also take the owner’s time, perhaps causing the owner to change focus, or worse, loose focus (the monitoring and controlling of these additional P&L activities needs to be factored into the owner’s day!). It takes a good deal of discipline to regularly take time out of daily routines to analyse the business & the processes. This may mean the owner now looks for automation that will save time; more of the owners time taken away from growing the business. Unfortunately it is a truism that owners must spend time to save time. It is also important for the owner to understand that the processes initially developed and used when the business started are unlikely to be scalable and hence new processes need to be developed. Yet more time the owner needs to spend on streamlining the business rather than developing the business. With all of the extra time the owner now has to spend “In” the business, the vision is critical for the success of the business. If the owner is fully committed and effectively manages their time, the business is likely to prosper & grow (provided the revenue exceed the costs). The alternative is the business will survive with marginal returns and eventually go out of business when the owner gives up or retires
- Transformation
At this point in the business’s evolution, the owner now needs to determine how to finance the growth to a medium sized or large corporation. With this comes the issues of delegation, employment of managers, the checks & balances required to monitor the business, the prospect of deciding whether to maintain control or consider IPO and implementation of systems. Further, consideration needs to be given to the way employees are recruited, managed, paid and rewarded. All these changes are vital to the development and growth of the business. Management needs to pay attention to the right things at the right time.
Those who bring the business to this point do not always have ongoing success because they run out of cash, are unable to delegate or do not have the management skills required for a successful business (the owners often believe leadership & management are the same). Businesses at this point, frequently suffer from the “We’ve Arrived Syndrome” in which it seems survival no longer seems in question. The pursuit of business growth never ends, and success today does not assure success tomorrow.
- Consolidation
The greatest concerns of a company entering this stage is to consolidate and control the financial gains brought on by rapid growth. Further, the success achieved by embracing the advantages of small size, flexibility and entrepreneurialship are also challenged as the business becomes larger. Having arrived at this point the company now has all the advantages that come with large organisations; financial resources, managerial talent, access to innovation, choice of personnel, economies of scale etc. If it can preserve its gains, financial success beckons. If not, it will characterise itself with a lack of innovative decision making and risk taking which were the hallmarks of the successful smaller business. These characteristics will not of themselves become critical until the business environment changes. With an inability to decisively react to the environmental changes that will inevitably occur, the business will become a shadow of it’s former self.
The business world has many successful brands and companies. The challenge is to focus on the vision and maintain the characteristics that allowed the business to grow in the first place.
