Are you a small business struggling to get to the next level and deliver sustainable growth? Here are 10 keys to unlock your growth phase.
- Get a growth mind-set
It might sound obvious but you can only grow if you want to. Get a growth mind-set and change the status quo. To grow, small businesses need to challenge their processes, look for opportunities to exploit existing resources and learn from mistakes. The growth mind-set comes from the top and the vision of the successful business needs to be shared by all. Make a conscious decision to grow, and sell your vision with its benefits to your staff. Go ahead have that first staff meeting. It is just the beginning, to quote Lao Tzu, “A journey of a thousand miles begins with a single step”.
- Have courage
In a recent TED talk in Vancouver, Simon Sinek stated that the only common trait amongst great leaders is courage. Growing a small business takes significant time commitment and financial resources, but above all it will certainly take courage. Courage to make that bold decision, lead from the front or implement a new key process, whichever it may be.
The key is to have conviction in your decisions, and stand by them. If it works out then great, if not then learn and move on without dwelling on it.
- Take advice, listen and lead
Ok, so this is 3 rolled into 1 but the point is that they’re interlinked. People don’t expect everyone to know everything, not even the Managing Director or the CEO. The important thing is to know who to ask when you don’t know the answer, to trust their judgement and lead people in such a way that they are inspired and driven by your vision.
“Working with an external finance partner, an expert in bookkeeping and accounting enables improvements in many areas of the business.”
You’re really only as good as your team. If you work on your own you may need to look to others for guidance or outsource just to lighten the workload but we’ll look at this a little further on.
- Be open to opportunity
This is important because the key is the skill to recognise opportunities and act on them quickly before they disappear. These opportunities could be income producing like a new potential customer, a new market segment or taking a loss leader for a new future source of income. Cost reduction opportunities could be a new low cost supplier, new more efficient premises or outsourcing services. Collaborating with outside parties to assist with your marketing or managing your bookkeeping and accounting can not only reduce your staffing costs but result in resources being redirected to income producing activities – these are also opportunities.
“The really great thing about outsourcing bookkeeping and accounting during periods of growth is that an outside company can easily flex its service provision to meet your business needs as and when needed; it can quickly scale up in such a way that you won’t notice the additional workload.”
- Know your customers
Being in tune with your customers and what they want is crucial for business growth. Knowing what they want or what they might want means that you can adapt to their needs.
Good relationships with customers are vital. This value to enhance the customer experience needs to be shared top down in the business.
Customer knowledge is also about knowing how profitable your customer is to your business. You should not be afraid of increasing profitability, if necessary, by reducing service offering, finding more efficient ways of managing the current workload or increasing the prices. If you can’t make a customer profitable you should consider letting them go. Yes that’s right – letting a customer go if they are not profitable. Don’t forget to consider other business they may bring. If they are an unprofitable customer but still provide a number of good referrals or complimentary business they may not be that unprofitable.
- Focus spending
Realistic cost budgets are critical to financial planning and focusing expenditure. Often during start-up or in times of rapid growth, a business can become a victim of its own success, struggling to pay bills before revenue has been collected. Cash flow can become a very real problem and so it becomes especially important to control your limited resources and review spending in terms of return on investment.
Decisions should be framed by “will this spending improve/ increase revenue or reduce costs?” Consider the purchase of new capital equipment, will this save production costs? Will it open up new markets? Will it increase capacity without increasing floor space? These are all valid questions when making decisions, for instance you may have to choose between buying new equipment or re-painting your building. I can imagine which of these options are likely to have the greatest return. Bear in mind of course that some costs are necessary…insurances, taxes, certifications etc.
Sometimes these decisions are difficult especially with a limited budget. For example, deciding between customer satisfaction/retention or marketing to attract new customers; ideally you should be doing both. For a cash strapped business a short-term compromise would be developing sales and up-selling to existing customers.
HR costs also need to be budgeted. Should you hire, manage and motivate an in-house bookkeeper at a higher cost or outsource to a dedicated virtual bookkeeping organisation at a lower cost requiring less time commitment? Both have benefits but which has the greater return on investment? Which makes your bookkeeping simpler?
- Monitor cash flow…very carefully
This seems almost too obvious to include, but it can be the critical success factor for a business as it struggles to balance payments out with payments in. Let’s look in more detail at some areas where gains can be made.
Accounts Payable. Pay your suppliers as close to their due date as possible, negotiate extended credit terms with established suppliers, request electronic invoices to improve budget planning and control – these are all actions to improve your cash flow. Occasionally suppliers offer discount incentives for early payment, you should weigh up the benefit of the reduced cost against the benefit of extended payment terms at a higher amount.
A word of caution, regularly not paying suppliers on time can lead to suppliers putting your account on credit hold or stop supplying you altogether. This opens up many wider issues around your supply chain and can affect your reputation.
Accounts Receivable. The starting point for managing accounts receivable (otherwise known as debtors), for credit sales, is to reduce the risk of default on invoice payment and check the credit history of the prospective customer. If there is a history of non-payment then consider whether you need the sale more than the money in the bank.
Contrary to accounts payable, the aim is to expedite the payment of invoices, reduce payment terms if possible and minimise overdue payments. Making it as easy as possible for customers to actually pay your invoices helps and there are a number of practical things that you can do to achieve this. Contact us if you wish to discuss this further.
Inventory. Try not to tie money up in too much stock, after all money sitting in a warehouse in the form of stock can’t be spent on things which will move the business forward. Only enough inventory/stock necessary for firm orders (unless it’s standard and can be used across various product lines) should be kept on hand. This requires effective supply chain management. Investing large amounts of cash in holding large inventory increases the risk of obsolescence and theft. Moreover it can increase the costs associated with storing, managing and securing the inventory.
Managing cash flow can make or break a business. An experienced bookkeeper should be able to assist with cash flow management.
- Outsource your support functions
Identify your core business. Maybe you are in engineering, manufacturing, online retail, recruitment or medicine, the list is endless, the point is that your core business is what you provide your customers and it earns the revenue. Therefore all other functions are support functions. Many small to mid-sized business owners keep all support functions in-house which can be time consuming to plan, learn and execute. Ultimately this detracts from the energy used to drive the core business forward and hinders growth.
Indeed managing these support functions in-house can save money but is this a false economy? If in fact your customers get less attention, sales either don’t grow or are lost and the real cost to the business is the lost revenue. You could outsource to a service provider who would do the job quicker and more effectively because your support function is their core business. This may be Customer Service, Graphic Design, Recruitment, Legal support, Marketing, IT, or Bookkeeping and Accounting. Any of these areas are prime candidates for outsourcing.
Take Bookkeeping and Accounting as an example. The really great thing about outsourcing bookkeeping and accounting during periods of growth is that an outside company can easily flex its service provision to meet your business needs as and when needed; it can quickly scale up in such a way that you won’t notice the additional workload. It is not the same for an in-house bookkeeping system where increasing resources takes time and money. Outsourced accounting not only gives a simpler bookkeeping system, it saves time and best, it presents valuable information and reporting in a manner that you may not previously have considered. Indeed working with an external finance partner, an expert in bookkeeping and accounting enables improvements in many areas of the business. Ultimately, it will take the headache of accounting away and give you more time to focus on growing your business.
- Embrace new technology
It was only the early 1990s when the World Wide Web found its way into wide stream usage, by 1995 there were an estimated 45 million users, just 0.8% of the world population. Today there are approximately 3 billion internet users, around 41% of the world population. Potential for further significant growth remains on the cards as the types of devices used to access the internet increase as users look for more convenience and mobility, moving from laptops to tablets and smartphones and now to smart watches. Cloud based technology, as a result, is gaining more users daily. The market is estimated to grow from around $58bn in 2013 to $191bn in 2020. These are the high technological advances that have changed the way the world works and does business; not adopting this could leave you behind.
Advances in other areas are also more than noteworthy; consider nanotechnology, RFID’s, CNC machinery, robotics, automated production lines, predictive analytics. More than enough for an entirely separate post.
It is fairly likely that most businesses have embraced some change in technology, with the more successful companies being either early adopters or in the early majority. There are few businesses today that don’t have a PC or phones, have manual accounts or use steam to power machinery.
Identifying and adopting new and useful technology can help give your business a competitive advantage. It can reduce costs, production time and improve service delivery and the customer experience – all leading to a healthier business.
- Tie it all together
Do all of the above as part of a defined and deliberate strategy and give your business the best chance to grow to its true potential.