Dealing with growth pressures

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.

For many business owners, the pressures associated with growth can be immense. In the midst of a growth phase, we’re busy attacking problems, facing issues and managing change. It can seem a far cry from the exciting, early stages of new business growth, when ideas take hold, your first customers arrive and the business model proves its worth. But the success of any business depends on its ability to grow sustainably over time. Learning how to deal with the pressures of growth and planning accordingly is all part of building a successful business.

Reaching this next growth phase, however, means your business model is promising and you’ve achieved a degree of self-sufficiency and have, most 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 new people, new skills and new approaches. You also need to be prepared to change your behaviour. 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. Other growth barriers include:

• Over-dependency on the founding team

• Constraint by initial systems – IT, communications, reporting – causing administration overload

• Emphasis on sales, with the business lacking adequate analysis and planning

• Flat business structure, loyal staff but with skill gaps

• No contingency planning, not robust enough to survive major change

Understand where you’re going

With all these growth pressures, 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.

Set growth goals and undertake a review of your current business plan to ensure you are achieving your current goals. Consider bringing in a third party to undertake the review process with you as it may help remove the rose-coloured glasses we’re all guilty of wearing. This insight can be invaluable when setting goals and objectives for future business plans to ensure growing your business results in an improved market share and profitability. An advisor can also assist in determining where your business may be in growth terms and provide insight on the change process needed. This includes: establishing controls and systems for managing the business; taking on new people, approaches and disciplines; defining business strategy; introducing regular reviews and appropriate performance indicators; and working out succession planning and an exit strategy.

Growth means growing up!

Getting bigger and more successful often results in a struggle between business imperatives 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 data to justify each move. 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 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 new equipment, products, increased staffing and stock levels. So, it’s important you have access to sufficient capital to finance this and sound reporting processes to keep track of spending.

Preparing for growth is the perfect time to review your reporting processes and take full advantage of all the new technology available. Which functions in your business need be added or expanded? Who do you need to make it happen? These are critical questions for growth, and the answers are likely to change as you continue to grow. Ensuring you have systems in place that can handle your growth is paramount as you don’t want to be held back once your growth trajectory takes off.

While there is no magic formula, asking yourself the following questions could help your business grow more successfully:

• Do you understand the nature of your cash cycle?

• Are you setting, reviewing and achieving your business goals?

• Where are your gaps – in people, skills and systems?

• Does the business have the right debt and/or equity strategy?

• What internal processes can you streamline to allow more time to invest in new opportunities?

When you’re in the thick of it - busy dealing with the day-to-day complications of running a growing business - answering the hard questions can feel more like a crisis point than an opportunity. But ensuring you have the right planning, people and systems in place will support growth and allow you to stay confident, ambitious and moving forward.

About the author

David Pearson is managing partner of chartered accountants and business advisors BDO Central and has a speciality interest in advisory services to the optometry sector. Contact David at david.pearson@bdo.co.nz or visit www.bdo.nz 

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