The biggest obstacle to growth for many businesses is not poor sales, financing, or tough competition; it is often the business itself! So, if you find yourself operationally ill-prepared to grow, what can you do about it?
Here are 7 strategies that can help you break through some of the common barriers to growth that many small businesses experience.
1. Hire right, train properly, and manage talent retention.
Counsel employees about the importance of keeping up with change. Regularly review skills company-wide. Post jobs to assess talent availability. Build individualized training plans. Look for gaps requiring new hires. Make it a privilege to work for your company – one that is earned. Allow your workforce to grow and show what it’s capable of. Promote people who demonstrate values of ambition, drive, teamwork, honesty, and commitment to the company’s future.
2. Always be open to change, adapt to a continually changing customer environment.
Engage every department is looking for new markets and new ways to serve existing clients. Ask customers what else they need. Get vendor updates on what’s new. Attend trade shows for new ideas.
Commit funds for marketing. Expand profits by selling new products to old customers and old products to new customers. Look at both near-term goals and long-term objectives.
3. Remain competitive, differentiate your brand, remain attractive to your audience.
Do annual cost reviews. Put someone in charge of negotiating discounts with vendors. Get more efficient. Remember that cost-cutting only goes so far. Eventually, you’ll have to increase prices and pass along price increases. It’s better to do smaller price increases each year versus one big increase every few years. Suppose customers balk, beef up marketing to look for new opportunities. Keep an eye on what competitors are doing. Stay away from price wars – nobody wins. Instead, define a niche, a specialty, an add-on, something that makes your product or service more appealing.
“Smart business owners must understand that the decisions they make today could have long-term consequences that could affect them possibly for years down the road” – Steven Cohen; GreenMark Consulting Group.
4. Manage finances; do not let finances manage you!
Learn how to read balance sheets and income statements. Build KPIs (key performance indicators). Teach everyone in the company to use reports to spot problems quickly. Use budgeting tools. Forecast income by product. Estimate costs that vary as sales volume go up or down. Know how much you need to cover overhead. Forecast peaks and valleys. Know when you’ll need cash. The build-in margin for taxes, loan principal, shareholders and employees, and reserves. Tie salary increases and bonuses to company profits, not revenue.
5. Keep the honest, ‘honest’; be vigilant of what transpires at all levels.
We all like to think that we have good people we can trust. And for the most part, we do. But, as things get busy, it’s easy for things to slip by. Use tools and rules to help keep good people from doing stupid things. Let people know you want what’s best for everyone. Wasted hours, lost materials, and accidents mean fewer profits to share. When there is a problem, address it swiftly. Line up the facts. Get employees involved in resolving problems. Don’t let things slide.
6. Hire the right customers, fire the wrong ones.
Some clients are your company’s future; some are its past. Look for customers that are forward-thinking, well run, well funded, and concerned about the health of their vendor partners. Could you give them the top priority? Let poor-quality customers know you’re concerned. Look for late payers and low-margin accounts that demand a lot and don’t want to pay for the privilege. Replace them.
7. Cash is ‘King’; manage your finances, and do not let your finances manage you!
Every business needs reserves. Three months of overhead is good. Six months is better. We call it the “sleep at night” fund. Don’t try to pay down credit lines quickly at the expense of cash on hand. Instead, put $1 toward each. Build up current assets as you reduce current liabilities. Ask your banker to explain the ratios they look at to assess the health of your business. Set goals to improve those ratios. Build up hard assets, such as owning a building that can back-stop your lending needs.
In closing, to grow your business, you must continually improve every facet of your business to influence long-term success.
Looking for a good book on the subject, suggested reading;
- The Visionary Leader: How to inspire success from the top down.
- Susan Bagyura (Author), Michael E. Gerber (Foreword), Fiona Dempsey (Illustrator)