Business Growth Simplified
Growing a business is a processGrowing your business is easy! Just follow the proven formula and you can grow your business even in bad economic conditions. So what is the formula? The Small Business Growth Matrix organizes everything into a few simple to read pages. Each growth stage’s objectives are very specifically defined. So, determine your business’ stage and your primary objectives are clearly established. Now you know your destination. But as you know, before you can map out a route you need to know from where you are starting. Be careful here! Many small business owners would assess their business and stop there. But, you need to assess yourself too! I’ve seen too many entrepreneurs get lost in their business and lose track of who they are in the process. This can destroy you psychologically in a way that will directly impact the performance of your business. So, make sure you look at yourself. The article “Why So Many Small Business Owners are Unhappy?” has a good message that addresses this topic. Next, assess if your business is firing on all cylinders. You need to fix what’s broken and clear the obstacles standing between you and business growth. I call this Tuning Your Revenue Engine. Tuning your revenue engine improves your business’ performance allowing you to do more with the resources at your disposal. Properly applying asset is key to business growth. Finally, with all the information you’ve now gathered it’s easy to put your business plan together. Yes, I know everybody say you need a business plan. But, I take a very different approach. My business plans are more like a project plan - a solid action plan to help you achieve your goals. Think about it, you know…
A. What you need to do (objectives for your stage of the growth cycle). B. What you want for your life (an assessment of what motivates you personally) C. How much revenue your business is capable of producing and the resources at your disposal to get it done (Tuning Your Revenue Engine) D. Just outline who needs to do what by when gives you have a high impact business plan.See that’s a pretty simple formula. The problem is not many small business owners know the formula, so they never get started. If you'd like to apply this process to grow your business faster I'd recommend a DIY Membership. Membership provides you entry into the BGS Community with full access to the step-by-step SPARC Business Growth process, courses, tools and resources. Are you ready to get started? There are plenty of resources available on this blog that can help you get started. If you need a little more assistance contact us. We would be honored to assist you in getting your business growing again.
4 Leadership Business Growth FactorsThe leadership factors focus on the people at the top. In a small business that the owner(s). So, we often find business being held back from growth by the owner and not the potential of the business itself. I have written much in the past on the topic of self-knowledge and humility being critical to business growth. This is why these are important topics. the owner's state of mind and skills has an enormous impact on a business’ ability to grow. As a result, many of my coaching and consulting engagement become one of psychotherapy as we try to help the owner get past his/her mental obstacles. Let’s review the 4 leadership factors:
Owner Goals — how the owner has decided to use the business as an asset that supports their personal dream.
Operational Skills — how well the owner understands what the business does to generate revenue.
Managerial Abilities — how well the owner understands how to direct the management growth factors towards achieving his/her own goals for the business.
Strategic Thinking — how well the owner understands outside influences and applies the management growth factors to react to opportunities and threats to maximize return on the investment.
4 Management Business Growth FactorsThe management factors are a little easier to grasp. This is because they are the things we normally associate with business growth. However, notice you don’t see marketing and sales as part of the eight business growth factors. That is because these are business functions. Business functions are part of a business whether its growing or not. The business growth factors listed here actually cut across every business function. So, if you master these business growth factors you can get them under control in every function of your business. Let’s review the 4 management factors:
Financial Assets — the money-related resources necessary to achieve your business goals.
Personnel Resources — the team necessary to achieve your business goals.
Systems — the processes, procedures, and technologies used to achieve your business goals.
Business Assets — those tangible and intangible things that a business both owns and that give value to the business, such as equipment, facilities, customer lists, intellectual property, and so on.
Growth Requires More Than Just Working on Your BusinessAs you can see, there is much more at work here than just making sure the business is operating. The biggest thing that jumped out at me from Churchill and Lewis’ research is they actually found a correlation between business growth and an owner's skills and abilities (leadership). I had only observed the leadership dynamic at work in client businesses years before finding the Harvard Business Review articles. In fact, I felt the leadership dynamic was a bigger business growth influence than the management dynamic. Churchill and Lewis just gave me the third-party research credibility to my experience and opinion. Now it’s not opinion it became fact! My book Business Growth Simplified shows how to apply address the eight business growth factors to your situation. If you then apply this newfound knowledge it will have a positive impact on your business growth. So, there you have it. The power of the leadership and management as business growth factors. Most often the reason that a business stagnates is because the owner has reached his or her skill limits and self-knowledge. To keep growing, the owner needs to learn and apply the aspects of leadership and management growth that matter most for their business’ next stage of growth.
Your Business Growth Stage Influences Your Business Growth FactorsWhat you need to do relevant to the eight business growth factors is dependent on business growth stage. Complete the form below to download a quick self-assessment to determine your business growth stage. This will help you get more focused on what you need to be addressing as your try to grow your business.
- Calculate and monitor your marketing efficiency and effectiveness
- Scale your current marketing plan based your marketing key performance indicators (KPI)
- Add marketing campaigns to your marketing mix to meet any shortfalls
Calculating Your Marketing Efficiency and EffectivenessThese to KPI’s are not foreign to you if you are Tuning Your Revenue Engine. They are 2 of the critical marketing calculations. If you are unsure how to do these calculations check out our training program Calculating Your Revenue Engine’s Horsepower. Marketing efficiency tells you how well your marketing resources are working for you. You want this number to be low. The lower the better as it tells you it is costing you very little to generate leads for your product or service. Marketing effectiveness on the other hand tells you how well your message is targeted. That is, are you saying the right things to the right people to generate leads. If you find your marketing effectiveness is too low then our Developing Your Brand Position will help you hone your target market and message to that market. Managing these two indicators correctly can help you improve profitability. They also provide you with the information you need for the next step in the process.
Scale Your Current Marketing PlanOften small business owners skip this step. As a result they lose out on a lot of extra leads, and end up spending way more than is necessary on their marketing. Based on your KPI’s you should be able to determine how much you need to turn up the spigot to hit your lead goal. Look at the reality of this and your budget to determine if this is realistic or not. I am not advocating only doing what you have been doing, but maximize your return on investment (ROI) here before you begin testing new ideas. If the goal is to be profitable you want to minimize expenses. So, do what you can using what you know works, then move on to trying the new stuff!
Add to Your Marketing MixSales is the name of the game when it comes to business growth. You can’t sell if you’re not generating leads. At some point you will exhaust what your current marketing efforts can generate. As you will add additional campaigns make sure that they are part of an integrated marketing plan that brings in the additional leads you need. But, wait to begin this process until you’ve completed the first two steps. As you add new campaigns you will test and monitor as necessary. More often than not your marketing efficiency and effectiveness will be worse than your other efforts. This is why I recommend waiting to move into this realm, and do so slowly and cautiously. I frequently find small business owners move into new marketing efforts and slide back into the foundation stage as a result. They can’t figure out why. But, when we check their marketing KPI’s it is clear that they are generating leads less efficiently as they were. This means it’s costing more to get the business. More expense means less profit. So, move carefully into this aspect of the self-sustainability stage and make sure you can measure it as you do. For those of you that find yourselves at this stage does this clarify your struggles and help you get focused on what you need to do? If you have gotten beyond this stage share what worked for you as it may help others to get beyond the obstacle that stands between them and success.
Understanding Succession Planning From 30,000 FeetWhen discussing your succession plan you need to consider a number of different yet related topics including, but not limited to:
- Personal and Business Goals & Objectives
- How Decision Making Gets Done
- Selecting and Training Your Successor
- Owner Estate Planning
- Contingency Plans for Possible Scenarios
- Considering Corporate Structure & Transfer
- Preparing for Business Valuation
- Select Your Exit Strategy
- Execution of Your Succession Plan
Who Should You Include in the Process?If you should use a succession planning team, who should be on the team? This can vary by your situation, but it is fairly apparent by the previously described areas that at a minimum you need:
- Accountant CPA
- Financial Planner
- Management consultant
How Do I Start My Succession Planning?You can see this is a pretty complicated process. But, done properly you should be able to step away from your business in 3 - 5 years. The key is keeping an eye toward creating a self-sustainable business. Creating self-sustainability in a business is our focus at DE, Inc. In the coming weeks I will explore this from perspective of succession planning. Stay tuned!
- Collections are too slow
- Operation capacity is too high or too low
- Not enough sales
- Your price is too high or low
- You don’t have enough leads.
Slow Collections Causes Poor Cash FlowThis is a pretty simple cash flow problem to find. If you don’t get the cash for your product or service in a timely manner then you can’t pay your bills; have to finance your credit; and it cost you more to do business. If you get caught in this cycle too long it’ll put you out of business all together. This is usually where the accountants get involved and tell you “you need to watch you’re accounts receivable (A/R) and how you spend your money and all that good stuff. But, even if you collect upfront or don’t have A/R problems you can still have cash flow issues. The remain 4 problems show you how cash flow is more than just a collection problem.
Too Little Operational Capacity Causes Poor Cash FlowIn the post “2 Things Can Kill Your Profit” I show how your operational capacity can impact your revenue, but let’s face it “realized” revenue is what we’re really talking about when we’re talking about cash flow! If you have too much capacity, then you are spending money on resources that could be spending on something else. Thus you have an expense issue and don’t have the “cash on hand” to pay for the things you really need to be spending like marketing and sales. If you don’t have enough capacity then production is slowing down the revenue flow. If your revenue is not flowing then you’ll have poor cash flow. So, how much capacity should you have? That is depends on a few things. First, are you growing, shrinking, or just trying to maintain you current revenue levels? If you’re growing, then how fast are you growing? If the market is down or you are just trying to maintain that is a different story, but I would say stay between 50% - 80% of your capacitiy. On the low end look at cutting back on the high end make sure you have the capital to add more capacity or you should be create a game plan for how you will raise the needed capital to expand.
Not Closing Enough Sales Causes Poor Cash FlowMany entreprenuers think you need to close 100% of the deals you get or something’s wrong. In fact, most sales professionals will tell you a 20% - 40% close rate is pretty good. If you are outside of this range your close percentage is telling you something. If your close percentage is higher than 40% then your price is probably too low. I speak more to this issue in the next section. If your close percentage it lower than 20%, there are a number of things that can cause this situation:
- Pricing too high
- Leads are not well qualified
- Sales reps need training.
Price is Too High or Too Low Causes Poor Cash FlowPricing is another area where entreprenuers frequently struggle. If your price is too high not enough customers will buy. But, what if the price is too low? Now, the problem become you can’t afford to deliver or you aren’t making the profit that you need to make for the business worth the risk. I would suggest reading my previous post “Avoiding Price Problems That Can Kill Your Business” to find out how to evaluate or fix pricing problems that might be causing your cash flow problem.
Underperforming Marketing – Too Few LeadsAt the beginning of the revenue cycle is marketing. Marketing is a big problem for many small businesses. I believe the reason is because many small business owners don’t understand the real purpose of marketing – to generate leads for sales to close!! There are countless ways to market a business, and with all the new social media tools marketing becomes even more confusing. New Marketing Lighthouse's post "9 Ways to Generate Leads with Social Media" is a great primer to get started understanding how new marketing tactics can help if lead generation is the cause of your poor cash flow If you have poor cash flow, how do you know the root cause? This can be difficult to diagnose without the right tools. A great tool to get a quick snapshot is the Revenue Engine Performance Checkup. It can help locate the chokepoints in your cash flow cycle so you know where to take a closer look and find the problem. Contact me if you’d like a FREE Revenue Engine Performance Checkup.
What are the 3 Reasons Business Owners Get Stuck Growing Their Business?Here are the three “root-cause” problems and links to more in-depth solutions to each:
- Business owners don’t understand business growth is a defined process.
- Business owners work their business for a paycheck, instead of building an income generating asset.
- Business owners lose track of why they started the business in the first place.