The goal of most businesses is to grow. Growth is exciting. Growth implies success. More sales, more customers, more staff, more profit. But the reality can be very different.
We’ll explore some of the common issues SMEs face during a growth stage; and offer some practical advice for how to work through them. Issues like how to approach business planning, how to prepare for change and where to go for further support and advice. The goal is to help you face challenges with confidence and clarity – giving you space to focus on the next exciting stage for your business.
What does it mean to have reached this stage of growth within your business?
It means your business model is promising and you’ve achieved a degree of self-sufficiency; but you’ve likely outgrown your initial set up. It also means that it’s probably time to expand your controls and systems for managing the business – which means getting ready for new people, new skills and new approaches to come on board. To facilitate business growth, leadership must have the right attitude and mindset. Too often we see leadership teams who are happy with ‘Business as usual’ and this alone can stifle any growth potential.
The below are examples of common barriers that can often restrain growth potential. Reviewing these common growth obstacles alongside your current business plan will help to minimise the effect these barriers may have on your business growth.
- Over-dependency on founding team
- Constrained by initial systems – IT, communications, reporting
- Business is responsive and flexible; but lacking adequate analysis and planning
- Flat business structure
- Loyal staff; but skill gaps are showing
- Administration overload
- No contingency planning
- Not robust enough to survive a major change
Understanding where you’re headed
With all the pressures associated with growth, it’s important to take stock. Understanding where you’re at in the evolution of your business can be just as important as where you’re headed next.
Before you start setting growth goals, it is recommended that you undertake a review of your current business plan to ensure you are achieving your current goals. When completing these reviews, it is often helpful to bring in a third party to undertake this process alongside you. Working through a plan with a qualified adviser with knowledge of your industry can help you prepare for the known challenges that often affect businesses specifically in your sector. This insight can be invaluable when setting goals and objectives for any future business plans to ensure that your investment in growing your business results in an improved market share.
In order to facilitate successful growth a review of your business may include:
- Established controls and systems for managing the business
- New people, approaches and disciplines
- A defined business strategy, with regular reviews
- The effectiveness of the management structure
- Flexibility and scalability of IT systems
- Appropriate performance indicators; training and education for new staff
- Willingness for business to continue to evolve and grow
- Succession planning and clearly defined exit strategy
Getting bigger and more successful often results in a struggle to prioritise competing business tasks pulling you in different directions. The three main sources of conflict in businesses are growth, cash flow and control.
Business planning and reporting helps business leaders make strategic decisions, using the data to justify each move made. A business that doesn’t generate cash will not succeed; but sustained growth will chew through cash. There’s a similar tension between growth and control. When it comes to raising funds for growth, good sound planning can often make all the difference. Pursuing business growth can often mean you operate at a loss for some time, as you’ll be investing more to finance things like new warehousing, products or increasing stock levels. It is important that you have enough capital on hand to finance these new projects and sound reporting processes in place to keep track of this spending.
Going through a growth stage is the perfect time to review your reporting processes, taking full advantage of the new technology available. Which functions in your business need be added or expanded? Who do you need to bring in to make it happen? Where do you need to focus your key people? These are all critical questions for growth. Ensuring you have systems implemented that can handle your business growth is paramount as you don’t want to be held back by these easy fixes once your growth trajectory takes off.
About the author: Glenn Fan-Robertson is a Director with BDO Central (NI). He has extensive experience assisting both small and medium sized entities with a wide range of audit and advisory services, particularly in the Agribusiness sector. BDO Central are Chartered Accountants and Business Advisors, with offices in Napier and Palmerston North. The firm is an independent member of BDO New Zealand and part of the global BDO network.