Author: Ian Meharg | Reading Time: 9 minutes
At the risk of stating the mildly obvious, growth is the main objective for every company, none more so than the start up or SME/SMB keen to catch up with the “big boys.” Whoever started a company and didn’t want it to grow?
However, it’s become clear to us that a lot of business owners are not entirely sure how to make growth happen. For sure, some seem to have the magic Midas touch and their business just takes off like a supersonic fighter jet on reheat. Whilst others seem to be stuck in an earthbound rut and never able to drag themselves out of it for long.
Get Fit For Growth series
This series of three blogs is aimed at addressing this problem/challenge and is derived in part from our Webinar and our upcoming online project that cover the same ground, albeit in different ways and in different levels of detail. But whichever format you are using the message is the same. If you want to grow without leaving it to chance you have to PLAN for it. And like any new activity, if you’re not in shape to carry it out then you’re going to struggle.
To get you started, we’d like to share with you the structure of a fitness plan for your company. One that not only gets you in shape to grow but keeps you in shape.
The first stage of this, just like a physical fitness plan with your personal trainer, is to assess what state you are in now. Yep, it’s time to get on the scales and find out where the flab is and what we can do to get you racing fit. Let’s get to it then.
There are five key areas of your business you need to review so you have a baseline from which you can move forward and measure progress.
These are, in no particular order,
So, let’s take look at each in turn to see what you need to worry about and what you can leave for another day.
It won’t come as a great surprise that Finance is pretty important as in, without the right financial structures and disciplines in place, everything else is going to struggle.
For almost every business, cash and cash flow are vitally important indicators of the health of the company. You might on paper have great assets, a fantastic order book, market leading products and loyal customers but if you do not have the cash to pay the bills then you’re going to hit the buffers hard and soon.
Therefore, you need to understand this precious resource, how it comes in, when it goes out and what happens when it dries up.
Cash is King
Consequently, the first check you need to do is on cash management. Are you being paid on time? Are you paying out too soon? Is the business adequately capitalised? How long could you survive if your cash receipts dropped by 20%? 50%? 90%?
Act decisively, act now
Don’t wait for it to happen before you find out – do the modelling now with your finance team and once you have the answers to the “ah but that won’t happen to us” questions, start to take the right steps just in case it DOES happen to you.
You may find yourself having to make some very uncomfortable decisions in order to preserve cash but the reality is that it’s better to do that early and decisively rather than wait and watch the business slowly bleed to death.
Of course, cash isn’t the only consideration within the Finance function but it underpins almost everything. A thorough review of how cash flows through your business is a great first step.
Customers are your only source of cash so it’s super important you give this a lot of coverage. A lot of businesses tend to ignore the importance of retaining customers in their rush to acquire new ones to drive their growth. But it’s well known that it costs about five times more to land a new account than it does to keep an existing one so whilst you do need to generate more customers it should not be at the expense of ignoring the ones you worked so hard to acquire in the first place.
Apply the 80/20 rule
As the economy tightens and orders start to dry up, you need to know where your cash comes from within your customer base. Another fairly common ratio is that 80% of your business comes from 20% of your customers. But which 20%? Do you really know who they are? Go through your books to determine which 20% of your customers bring your greatest revenue. Then consider, what are you doing to look after them and make sure they don’t become someone else’s customer for the want of a simple phone call, for example.
Ask, engage, don’t wait to be told
Make it your priority to identify who are the top 20% of the people you sell to providing the 80% of the revenue that sustains your business. Once you know that, you must have a set of positive actions to ensure that you retain every single one of them. Don’t leave it to chance or assume they will always place their business with you. If you have competitors (and who doesn’t) you can be sure they will be doing everything they can to poach your best accounts for themselves. So don’t wait for the orders to dry up; engage those customers now and work with each of them to ensure they stay with you and know you’ll be there to support them when things improve in the future.
Don’t forget the little guys
Those guys are super important of course but that’s not a reason to abandon everyone else making up the other 20% of your income. Ok maybe you don’t have the bandwidth to give each of them a personalised retention plan but you can still make sure they know you care.
The top 20% should be the focus for your sales team but the remainder can probably be dealt with by marketing and customer service or on a quarterly schedule.
The key lesson is not to assume anything is certain – go the extra mile or yard to avoid them leaving you. Don’t wait, engage now.
When you launched your business, it may well have been on the back of a ground breaking innovation. Either a product, or a business model or even just your marketing. That innovation made you what you are today and will probably be a major contributor to what you are tomorrow. It’s always tempting when things get tight to cut some parts of your business to save money. After all we did say “preserve cash.”
But a crisis is a great opportunity to innovate. You need to have a vision of where you want to be when business picks up and it might not be exactly where you are now. Innovation can open up new markets, new ideas, new business models as well as new products.
You will need to look at who are the key individuals creating those new ideas that will keep your business strong in the future. Identify them and make sure you hang on to them so they don’t go to a competitor.
Don’t stand still – keep moving forwards
And if you are not innovating, you could be in for a bigger shock than you expected as you suddenly find a whole host of new players coming at you with new ideas and giving your “loyal” customers a good reason to look elsewhere.
Everyone says employees are a company’s greatest asset but how does that work in practice? Ask yourself this: who would have to leave the business for it to be in mortal peril? Are there some individuals who are so vital to your success, either from what they know or what they bring to the business, that you would not wish to lose?
Those are the people you need to identify as being pivotal and have a plan to make sure they stay on board. Sadly, at the other end of the spectrum there are inevitably some individuals who do not pull their weight or who have not created the impact you first though when you hired them. You won’t be sorry to lose them but you may still need a plan to replace the role with someone more effective.
Look after the workers as well as the stars
In the middle are the folks who keep things ticking along, turn up every day, do their (not very glamorous but essential) jobs and are 100% reliable. You need to look after them too but in a different way perhaps. Make sure they feel comfortable, have what they need and know you have their back. Be prepared to accommodate changes in their needs if they suddenly find themselves in strained circumstances such as parent or child needing extra care.
Most importantly don’t wait for the problem to explode in your face – reach out to everyone and positively assess and assure them it’s all going to be OK. You will be amazed at how far that personal touch goes when it comes to getting the extra mile from your team.
Super vital you get and keep control of the agenda when things start to wobble, or even when they take off. The key thing here is to be open (as much as you can), be honest (although that does not mean telling everyone everything all the time) and be available.
Horses for courses
You will have a lot of things to say and hear from a wide range of audiences and stakeholders. Identify which are the main groups, who “owns” them – by which we mean, for example, your CFO might own the investors, your sales director might own your customers and so on – and what the communication plan is for each group. They will all have different needs so it’s important to identify which is which.
In turbulent times you can’t rely on word of mouth or press releases. You have to be the figurehead, the lightning rod, the spokesperson and the general all rolled into one. This is your time to stand up and be counted. However hard it might seem it will repay you many times over.
Summary and key actions
Remember this is all about getting your business in the best shape to exploit all opportunities to grow. You need to know where you are now, what your aim is for the future and have a plan to get from one to the other.
- Start with an honest, “drains up” review of where you are today
- Cover all key business functions from finance to HR
- Don’t assume, always ask and cross check
- Leave no-one behind or feeling they have not had a voice