Avoiding Growing Pains
Growth is a major goal for any business. You have no doubt heard it said before that, if your business isn’t growing, it’s dying. However, not all growing businesses are healthy businesses.
Many people believe that as a business grows the risks associated with that business reduce, however, quite often the opposite is true since the stakes are constantly growing. Imagine a winning streak at the casino where someone starts with a single $2,000 gamble on black and lets each win ride, by the sixth spin, that person is no longer risking $2,000 but $128,000. The stakes have grown with each win. Similarly, as a business grows from 6 figures to 7 or 8 figures, the risk involved in the operations grow in parallel. Potential profits are greater but so too are the potential losses given that many things are needing to be done at greater scale. More inventory, more staff, more floor space, the list goes on. While this is simply the nature of a growing business, there are things you can and should do to manage these growing pains and minimize your risk.
Focus on the right kind of growth
Business owners should avoid a “sales at any cost” approach to growing their business. Increasing sales does not always equal increased profits and/or business success. I know of many examples where businesses have grown, sometimes exponentially, to 8 figure turnovers only to then collapse into administration. Make sure your sales are coming from the right channels and delivering sufficient margins. Always target repeat business customers as they are almost always providing greater margins and always manage your cashflow like your business’ life depends on it, because it just may.
Evolve the way you work
A growing business needs to continually evolve the way it operates. The processes and systems used in a 6-figure business will almost certainly be insufficient or ineffective in a business that is turning over 7 or 8 figures.
In a 6-figure business the owner may need to wear many caps such as that of manager, marketing, sales and finance. However, as the business grows it will almost certainly require greater segmentation of and specialist individuals in each role. Not doing so will only hamper the business growth or worse, severely impact its profitability.
The right people at the right time
Just as a growing business needs to evolve its operations, so to it needs to revisit the people it employs at all levels, but particularly those in senior roles. It is after all people that drive a business and none more so than its leaders; the owners, managers, and those in key business development roles.
If your business is turning over 6 figures and you want to grow to 7 figures, then you will need people who have experience growing a 7-figure business and these may not be the same people you have had to date. This can be challenging for some owners who have formed close friendships with people in their business over the years, but it is important to understand that these people may wind up being a liability to the business if they are being relied on to deliver outcomes beyond their expertise.
A good business operator will also understand and accept their own limitations. While it is not uncommon for a successful business owner to realise they have reached an impasse in their business journey due to their own limited abilities and decide to exit their business by selling out, others will simply recruit or seek to partner with someone with the skills they need to complement their own. A savvy business owner is not too proud to hire someone to sit above even themselves as the CEO for example, providing this person has the skills and experience needed to steer the organization to where they wish it to be.
Expect hard times
Good times never last forever so you should always expect and plan for hard times. Down turns in the economy, changes in market conditions, increased competition, decreased demands for your goods or services, regulatory changes, or heaven forbid a pandemic. This list is truly endless and as dynamic as the business itself. A good business owner will do what they can to build resilience into their business operations as well as themselves. Mental resilience is just as important as business resilience when it comes to dealing with hard times. Always have a plan and surround yourself with good, reliable, and trusted individuals that will be supportive, honest and always acting in your best interests.