Most new businesses make it to revenue, and many make good revenue, but during their early stages many businesses endure significant growth pains. Here, Mike Boorn Plener explains how you can avoid the ‘Growth Trap’.
As the economy is rapidly picking up pace, businesses that are poised and ready for growth will reap the greatest benefits in the coming years. Here are five steps that can help you catapult business growth on a budget.
1. Momentum: Think of business growth like a freight train, but you’re pushing it down the track with your own hands. So to begin with it’s very hard work – you sweat and feel like you’re going nowhere. Eventually you get going, and as you do you want to keep pushing, gain speed, and let the train start rolling. But you don’t stop there – as you move down the tracks people come along and help the pushing. Your sales grow so you can buy more coal to fire up the engine. But you have to keep that momentum. Where so many businesses go wrong is the stop-start-stop-start.
The fixer: Make sure that you test before you start. Do you have a team that can push, a product that sells, and a marketing machine that works? Many of these things can be tested well before you really start. Once you’re ready, be ready for a marathon. That’s what it takes.
2. Profitability: For most businesses you need to watch your profitability gap. You may need to produce a certain number of widgets before manufacturing is viable. Or do a certain number of billable hours before it pays the office rent overheads. As you expand it gets worse – you now need to hire one or more people to do more of what you do already, or to expand activities. What if it takes two months before a sales person is up to full steam? In the meantime you have to pay their base salary, while spending a significant part of your time with them. Sales will probably drop before they start going up.
The fixer: Keep a relentless eye on revenue as your first measure, and then check that your margin is preserved as you expand. Consider outsourcing, contractors, revenue partnerships, JV’s etc.
3. The marketing machine: If you rely on traditional avenues of marketing, growth is a challenge. The premise is that you have to keep pushing. Push new campaigns, push sales, and so forth. The moment you stop pushing. growth will wane. This is not ideal. To create sustained growth you have to think of your marketing as a machine that keeps chugging along – just like that freight train.
The fixer: Create sign-up forms on your website, automate your e-newsletters, get a low-cost helper to handle your social posts, and make sure you, as the business owner, will only do things once. In other words, ensure your marketing machine keeps producing not just leads but prospects, so you can take your eyes off it while you focus on other areas of the business.
4. Scalability: Can you do 50 per cent more revenue with the same team? If not, find out how you can. One of the key hindrances of growth is when you can’t expand your organisation to match the growth you need. Bringing new team members on board is expensive and takes time.
The fixer: Systems. Ensure you have your customer, order, finance, production and other systems in place and functioning well before you bring on board new team members, otherwise you simply won’t get the full benefit of them coming in. Also, ensure you have procedures that new team members can rely on.
5. Reporting: Want to count more revenue? Count it more often! If you report monthly, start reporting weekly. If you report weekly, start reporting daily. If you’re not reporting on revenue, start doing so. The rationale is simple: if your sales are sagging (your second indicator of growth – the first one is orders/commitments) you need to know sooner rather than later. If, after the first week in a month, you see you’re behind, you still have three weeks to catch up. If you report at the end of the month, well, it’s hard to catch up on that month.
Mike Boorn Plener is CEO and Executive Producer of Business Connector.
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