Tag Archive: growth_strategy

3 Ways To Grow Your Business

3 Ways To Grow Your Business

3 Ways To Grow Your Business3 Ways To Grow Your Business.These three avenues will help you focus on the core while capturing new growth opportunities.

Every business we know struggles with the tradeoff of investing in and maximizing the core business while trying to take advantage of growth in new, adjacent markets. It’s generally easier (and more profitable) to focus on your core business. That’s the place where you have all the advantages–key customer relationships, brand recognition, strategic assets like equipment or offices, and more assurance that growth investment will pay off.

 

However, every business that creates super-sized growth does so by extending its advantages into new, adjacent markets–new geographies, new product segments, new customer segments, or new sales channels.

How do we typically solve this dilemma? We try to balance a healthy mix of investment in the core and exploration and experimentation in new markets. Unfortunately, it’s hard to build an organization that does both well. Which is why we typically segment the business (and individuals’ roles) into one of three trajectories: maintaining business as usual, maximizing the potential of the core business, and investing in new adjacent markets.

3 Ways To Grow Your Business: Business as Usual

In any company, it’s important not to take your eye off the core business. Each business should be expected to maintain a healthy growth rate–usually at or above the market growth rate–which extends the growth the business has comfortably achieved in the past. We call this the “business as usual” growth rate, because it represents growth the business could achieve without significant investment. Note that it’s not a “manage for cash” position; the business still funds investment that is necessary to maintain growth. Put a team on this that is responsible for delivering “business as usual.”

 

3 Ways To Grow Your Business: Maximizing the Potential of the Core Business

What would it take to get more out of the current core business without moving into new markets? This might result in achieving a certain level of market share in core markets with targeted profitability. There is likely some significant investment required to get there, above and beyond “business as usual” investment. Assign a team to execute this investment and make them accountable for achieving the growth above the business-as-usual growth–likely over multiple years.

 

3 Ways To Grow Your Business: Investment in New, Adjacent Markets

Every company has opportunities to create growth outside of its core by leveraging its key strengths and strategic assets. This might translate into entering a new geography or adding a new product line. Make a team accountable for this growth, distinct from the rest of the business. Let them focus on experimentation-style growth over a period of time, where investments are trialed and tested. It’s important that you separate this investment from the rest of the business; otherwise, it’s too easy for these funds to be poached for investment in the first two areas.

Breaking your forecast, mindset, and organization into these three distinct pieces will ensure that you balance investment across each of your growth horizons, giving you the best chance of maximizing growth of the overall business. 3 Ways To Grow Your Business.

 

Managing ‘Goldilocks’ Growth: Avoiding the Traps of Expanding Too Quickly or Too Slowly

Managing ‘Goldilocks’ Growth: Avoiding the Traps of Expanding Too Quickly or Too Slowly
by Sherron Lumley.

When Goldilocks of fairytale fame first launched Three Bears, LLC, the small start-up company was a long ways from where she wanted it. “Oh no, this business is too small!,” she complained. Right away she set about making things happen, working day and night to build the business of her dreams. However, after a period of rapid growth and expansion, she was struggling to meet customer demands, sacrificing quality, scrambling to fill vacancies and feeling stressed out by finance payments on the loans she took during her growth-at-any-cost mania. “Oh no,” she found herself saying one day, “this company is too big!”

Managing the pace of growth for your small business may feel like the proverbial Goldilocks tale, an eternal struggle to find just the right size for your business that avoids the pitfalls of being either too big or too small.

The scenic route

Brian Easter launched Nebo, an Atlanta-based interactive marketing agency with his brother Adam Harrell, in early 2004. For Easter, coming from the global telecommunications field, his previous experience within a large multinational was not a fit with his personal values. The company he pictured as his ideal was one that was smaller, where human relationships would be seen as important.

The business model he created wasn’t about maximizing profits. “It was about doing great work,” says Easter. This emphasis on being a small company with strong values and a focus on doing good work led to dozens of marketing awards and a strong client base with steady growth of approximately 20 percent per year for the first seven years.

Then last year, the business grew 57 percent in net revenue, which brought up an unusual question for the brothers. “For our business, we asked, ‘Why do we need to grow?’ We don’t believe in taking a project for a paycheck,” says Easter, adding, “sometimes, no is more powerful than yes.” The decision to turn away some projects was a deliberate move to stop runaway growth while focusing on doing more high quality work with their best clients.

So what is the driving force for Nebo now, eight years after start-up? “One of the things I want to do is grow revenue without growing employees,” says Easter. “I want to focus on the people in the room, to raise their skill set and earning potential. I want them to grow in terms of salary and quality of work,” he says. This de facto curbing of growth by putting the brakes on hiring is one good strategy for keeping growth in check.

PQ_ManagingGrowth.jpgCritical velocity

“We want to do great work and be professional, but we are also trying to defy gravity,” says Easter.

Many small business owners understand what those words mean. Defying gravity represents doing the seemingly impossible, such as maintaining high standards during periods of rapid growth and expansion. But the reality is, if defying gravity were really that easy, then everyone would do it. For some small businesses, conquering growth is more like learning to ride a bike, if you don’t pedal fast enough, the bike falls over and it’s try, try again.

This was the case at a marketing firm in a galaxy, far, far away—not really, just the suburbs of Chicago— where an altogether different approach did not work so well. “For my small business the struggle came in the form of having plenty of clients, but not enough workers,” says Ruth Ann Weisner, founder of Raw Marketing. “Within a few months of formation I realized I must hire help or there will be no chance for the company to grow,” she says.

However, in a rush to hire people to meet quickly growing demand, she took on staff with the wrong skill sets, hoping that with the proper training it would all somehow work out. “I went about it the wrong way,” she says, “after several months it was back to square one…lesson learned.”

Gathering a team

Philip Noftsinger is the Business Unit President for CBIZ Payroll, Inc which provides professional business services to help clients manage their finances and employees. Noftsinger is responsible for creating CBIZ’s monthly employment index, which highlights small business employment trends and brings a deep understanding of small business growth (or lack of growth) and connected dangers.

Noftsinger’s experience with outsourced payroll and HR services for 5,000 clients gives him a unique perspective on the success or failure of small businesses. “I know for certain in the last three years, there is an increased ability to be more agile,” he explains. First, with regards to human resources, he sees a lot more 1099 professionals (e.g., contractors and freelancers) and more temporary workers. A fluctuating workforce means small businesses today are better able to meet changing demand than the small businesses of the past. Secondly, he sees small businesses embracing the idea that Main Street companies need lean production, looking at the cost structure of the labor and resources that go into their production process in the same way that large companies do.

Financing for growth—and when to say no to demand

“Small business owners, when they are first looking at growth, often it’s because they have a great product, and in that case, demand will outstrip capacity to produce,” Noftsinger says. “When demand is outpacing supply, for large companies that’s easier to deal with,” he adds. Small businesses, on the other hand, have to look at how much investment capital is available to meet demand and whether that money will come through debt financing or growth through profits. “Occasionally, a small business has to deny demand and walk away from sales,” he says.

Easter describes his financial strategy as conservative. He and his brother decided to fund the start-up of Nebo from personal savings and without the help of outside investors. “It was a reaction against the industry,” says Easter. “I’ve seen one of our competitors lose control of his company, recklessly taking investment dollars,” he explains.

Happily ever after

“It didn’t happen overnight,” says Easter. “There are no short cuts,” echoes Weisner.

When it’s time to expand your small business, consider the company culture you want, then set a deliberate pace for growth. Don’t be afraid to deny demand or spend the time and money to hire appropriately if you feel those strategies best fit your long-term plans. After all, it’s about finding the pace that’s just right for you.

Managing growth – first steps for small business owners

Create the company culture you want. Establish core values and a company mission.
Forecast for growth. Plan ahead for the next three years and revisit the plan often.
Maintain standards by setting a deliberate pace for growth.
Understand the ramifications of financing growth; know your cash flow position.
Say no to demand when necessary.

Finding the time to grow – not just run – the business

By Sherron Lumley.

For many small business owners, finding the time to grow, not just run their business can be a perennial challenge. “It’s tough,” says Sharon Rose, owner of Rose City Acupuncture in Portland, Oregon. In addition to seeing clients throughout the day, Rose keeps her own books, manages her own billing, writes a monthly newsletter, and handles the marketing for her business.

“With relatively few resources and often no support staff, managers of the nation’s 26 million small businesses can find themselves even more pressed for time than overworked and stressed-out colleagues in big corporations,” writes Hillary Chura for The New York Times.

Pull-Quote3.pngTo get a sense of the challenge and scale of the small business growth problem, a 2011 National Small Business Association (NSBA) survey of 400 small-business owners reported, “Unfortunately, 45 percent do not believe there will be any growth opportunities for their business in the coming year,” and, the number of small businesses reporting decreases in profits was just as large, at 46 percent. In another new report by market research firm Infogroup, more than half of the small business surveyed—56 percent—reported their “growth” was flat or had declined in the previous 12 months.

Creating a blueprint for change

But in keeping with the entrepreneurial spirit, both the NSBA and Infogroup surveys found that a majority of small businesses reported feeling confident about the future of their own individual firms, with most anticipating growth. So how does one go about making growth a reality?

Distinguishing short-term goals from long-term goals is an important first step in putting one’s business on a growth track. Long-term goals are big picture, purposeful and mission statement driven. Short-term goals are S.M.A.R.T: Specific, measurable, action-oriented, realistic and time-specific. “Give yourself daily, weekly and monthly activities and standards to which you hold yourself personally accountable,” writes Bob Phibbs in his book, The Retail Doctor’s Guide to Growing Your Business. “You must feel all of the work is worth it, or you will be doomed to failure.”

Kurt Andrews, who runs his own American Family Insurance Agency in rural Corvallis, Oregon, definitely feels his work is worth the time investment. Though he has two employees, Andrews still handles most day-to-day operations, saying, “I believe in being available to speak with my customers personally.” That’s not surprising since it was that same personal touch that helped him initially build his customer base—his early sales prospecting involved heading out to construction sites with coolers full of ice water in the summer and coffee and donuts in the winter to chat up small contractors and their employees.

Twelve years later, though, taking care of all his current customers leaves him little time to find new ones, he acknowledges. “I can’t rest on my laurels,” he says, “It’s change or die.” To avoid that fate, Andrews says he would like to grow his business by ten percent in 2012. Again, that short-term goal is precise, measurable and time-specific. And to accomplish this goal, he is specifically blocking off four hours per week to focus on growth, make cold calls, and contact referrals. He will also participate in an upcoming Farm Expo to meet potential new clients and plans to take the time to visit all of the local co-ops and grain elevators in his farming community this year.
Don’t make today the enemy of tomorrow

Time management expert Peter Turla, founder of the National Management Institute, says, “Many people prioritize items based on what’s most urgent and what’s next-most urgent.” Instead, he says the key is to ask, “How does this activity fit in with my long-term objectives and where I want to go with a particular project or with my career or my life?”

Although it is tempting to concentrate solely on building relationships with existing customers, this can’t be a business’s sole focus if it is to survive and prosper. When the NSBA surveyed small business owners about which future growth strategies they plan to implement in the coming 12 months, the top four responses were: new advertising and marketing strategies (43 percent), expanded Internet presence and e-commerce (36 percent), and strategic alliances (26 percent). However, “no growth strategies planned” came in at fourth with 24 percent.

“With me,” says Rose, “I see people a couple of times and then they are healed and they go away, so I always need to find new business.” To raise the visibility of her acupuncture business, Rose takes advantage of 20 minute pockets of time to update her business Facebook page, network with other professionals, and handle email correspondence, tasks that will ultimately lead to more business. Occasionally, she sacrifices a weekday of appointments to participate in trade shows, where she offers a limited range of services to attendees, who she sees as potential future customers. “I lose a Friday when I do a trade show over the weekend,” she explains, “but it’s essential.”

Learning to delegate

Do it, ditch it, or delegate it is a favorite tenet of time management, but of the three Ds, delegating is the perhaps the hardest for small business owners to do. “If you want your business to grow, you need extra brains—not just extra brawn—no matter how smart you are,” says Rhonda Abrams, author of The Successful Business Plan: Secrets and Strategies. She adds, “While this may seem self-evident, hire well. Just as it’s easier to be a good parent if you have good kids, it’s much easier to be a good boss if you have good employees.”

To better delegate his agency’s clerical tasks, Andrews hired an assistant to work afternoons and a licensed agent who works in the mornings. His assistant takes care of the front desk responsibilities, filing and making past due calls, while the additional agent can handle functions that require an insurance license, such as following up on leads. Although he intends to stay available to his customers, having the phone lines covered throughout the day at a minimum frees his time to pursue his business growth strategy.

Creating a blueprint for change, prioritizing tasks with an eye toward bigger goals, and understanding the importance of delegating: following these three steps will help small business owners finally find the time to grow, not just run their companies.

Charting Your Business’s Success

Breakeven Analysis, Pro Forma Forecasting, and Growth Strategy.

by Sherron Lumley.

New Yorker Douglas Tausik is thinking outside of the box. In 2007, he founded Tropix Technology, a business that sells laptop computers to the East African market, specifically in Uganda. His big idea came from a visit to the area and a discovery that fewer than two percent of the Ugandan population owned a computer. “Our ultimate goal is to provide doctors, teachers, and students with computers,” says Tausik.

So far, Tropix has sold 50,000 computers in Uganda, a good start toward bringing computer literacy to the country via affordable computers that are made in China. To stay on track, Tausik relies upon several financial planning tools to help him answer three vital questions that every small business owner must ask:

Will the business be able to make money?
How long will it take until it’s profitable?
How will I know if the business is meeting its goals?

Breakeven analysis, forecasting, and cash flow projections—these are the things small business dreams are made of. Each tool provides a strategic starting point for making the envisioned future a reality.

Breakeven analysis

In Tropix Technology’s case, profit expectations and expenses are kept to an absolute minimum in order to make the computers affordable to Ugandans, lowering the breakeven point. To break even is a simple enough concept: at a certain point, expenses will be covered and the business will start to make money. Breakeven analysis means calculating all expenses the business incurs and determining how much product or service must be sold and at what price to make a profit.

For Tropix Technology, one of the main expenses is providing after-sale service and repair in Uganda, a benefit that has never been available before. “We had to analyze how many units to sell per month to operate the service center,” says Tausik. Some of the elements that go into a breakeven analysis include raw materials, labor, utilities, fuel, marketing, fixed costs such as rent, and variable costs such as shipping, selling expenses/sales commissions, and taxes.

The U.S. Small Business Administration (SBA) offers a link to preparing a break-even analysis provided by Nolo.com, a legal publisher in Berkeley, California. Nolo also provides information on its website on preparing a profit and loss forecast, a cash flow projection and estimating start-up costs.

Pull-Quote.pngPro forma forecasts and cash flow

“We are definitely involved in forecasting and do cash flow projections,” says Tausik. “We have to fund the manufacturing of the computers, then we have to ship, then collect funds, so we have to analyze the cash requirements. Our commitment is never beyond the actual shipment because we do not do the manufacturing. We gather the orders, then when we have enough, we place the order in China,” he says.

The Latin term pro forma (as a matter of form) in business means projecting the future status of the company based on current performance, without including unusual and non-recurring transactions. Pro forma financial statements are similar to regular financial statements, except that they are educated guesses of what will happen in the future, based on the goals of the company and what is known right now. A pro forma balance sheet will include assumptions of future cash flows, assets, and liabilities. A pro forma income statement includes expected sales revenue, cost of goods sold, losses, operating expenses, equipment, depreciation and taxes. A pro forma statement of cash flow will predict inflow and outflow of cash to the business and give insight on potential shortages.

Realistic pro forma forecasts can be helpful to a small business by providing insight into needed course corrections. To make a forecast with any degree of accuracy, some actual data is needed, such as prior revenues and expenses from a known period of time. Typically, three to five years of data is considered a healthy period for discovering trends, but when the market is in mid-swing, a shorter time span may be more appropriate.

Growth Strategy
Just two years ago, Internet service became available in Uganda via a high-speed optical service built by China. The Internet Service Provider (ISP) sector is growing slowly, but in time will develop Internet access for more Ugandans, the majority of whom are still subsistence farmers. With this in mind, Tropix has plans for expansion. “It is an underserved market,” says Tausik. “Currently 30 to 35 percent of the population work in non-farming professions,” he notes, “and there is already reliable Internet service available in the capital city of Kampala.”

Tropix’ initial sales to the civil service sector was met by great enthusiasm from the Ugandan government, which provided a sales office for the company at no cost. Now, attention is focused on the country’s doctors and teachers, with a goal of 80 percent computer ownership. Additionally, there are thousands of incoming Ugandan university freshmen each year with no computers, so students will be an important target market as well. To reach the 80 percent goal the company will need to sell a total of 400,000 computers over the next five years. “We forecast the amount we have to sell each year to reach that goal and then make a marketing effort that corresponds to that,” Tausik explains. Part of the marketing effort is mobilizing a group of teachers to go from school to school.

Becoming familiar with breakeven analysis and pro forma forecasting is essential to meeting small business goals. With the knowledge of expenses and sales, a small business can calculate its breakeven point, forecast future cash flow, plan for profit, and create a growth strategy.

Additional Resources

The U.S. Small Business Administration (SBA) provides a free online business planning course and business plan template that includes breakeven analysis, pro forma cash flow and a full list of items to include in a complete business plan. To learn more, follow the links below to other online resources.

A breakeven analysis will show you where your company begins to make a profit.
The breakeven point determines whether expenses, sales, or prices need adjustment.
Cash flow projections help prepare for shortages that can derail a small business.
Forecast realistically by using recent data considered in the context of the current market.
Pro forma calculations have many uses beyond the initial business plan, including planning for strategic growth.