According to a study of Bain & Company, only one out of seven businesses manages to grow successfully.
BARRIERS TO GROWTH
Barriers to successful business growth are complex. The main reason for unsuccessful growth is not having a growth strategy plan – or failure to implement one. A poll from ADL and Fortune revealed that only about 25% of all respondents fully realized their intended strategies. Looking at this evidence we can draw two basic conclusions. Either the management team had deficits, which prevented the utilization of the strategy or the whole plan wasn’t analyzed correctly and the projections and scenarios weren’t real. There are other areas that can contribute to unsuccessful business growth also. I call these the “lacks.” Lack of sufficient financial capitol from inside or outside the core business, lack of qualified people, lack of expertise, lack of planning or understanding of the risk, lack of willingness or ability to change and lack of willingness to consider experience from outside the company.
PRECONDITIONS FOR GROWTH THROUGH EXPANSION
The most important element an organization should have is a strong core business. Such a core business has the following characteristics:
· It has a profitable combination of strategic assets (like equipment, intellectual property rights), skills and abilities (workforce has expert knowledge), competitive products/services, and their profitable relationship to the market place.
· The CEO knows what distinguishes the business from its competitors. In other words, what his business makes it unique?
· The business can and does profitably serve a particular market segment with a perceived value added.
· The core business does not necessary contribute the largest portion of revenues, but it does contribute the largest portion of profits.
KEY DECISIONS TO MAKE GROWTH HAPPEN SUCCESSFULLY
First determine who is responsible for shaping growth strategies. Should the CEO create the strategies, consider outside advice or take suggestions from subordinates? Second, address the staffing issue. We all need the best talent on hand to grow and must consider how to motivate that talent to perform. If we are moving staff from our core business, how do we address repatriation if the growth strategy fails? Third, growth initiatives need investment money. CEO’s must decide how to fund the growth through the use of corporate savings or outside investment capitol. They also need to walk a fine line of knowing the difference between stopping too early or throwing good money after bad. Fourth, the CEO must decide how deeply to involve the growth plan. Should the whole organization be involved or just a “skunk works” style team specifically formed to run it? Fifth, how does the CEO govern growth once the trigger has been pulled? Should the CEO keep a tight grip on every detail, or just oversee the big picture?
FINAL STEPS TO SUCCESS
Finally, how does the CEO measure success and manage the desired outcome? Make this decision: Should the growth initiative’s numbers be folded into the existing P&L or should it stand alone? Once a number tracking decision has been reached, launching the strategic plan is only the beginning. Ruben developed our Core Disciplines of Business template as a tool to measure conformity, build systems and create sustainability. This is the best way to begin to build structure and systems into the growth initiative. Ensure your vision for the new growth initiative is clear, develop its core values that should represent how you will treat the human element on the journey, and define a mission statement that leads the people to understand what success looks like to you. Establish and oversee all growth activities, sales, marketing, advertising and branding. Keep a close eye on all the financial numbers, budget, cash flow, debt services, and know what KPI’s you will need to see and where to get them on demand. The same rules should apply to the new growth initiative as they did when you were building the core business. Everything else is just getting the work done!
Growth, sustainable growth, is required for a successful business. True success is measureable! If you still believe you can grow into a profit, call us today for a free business evaluation before it’s too late and even free will cost too much.
Steven Lynn is a Business Coach at Estrada Strategies in Ontario, CA and can be reached at (909) 578-7000 or firstname.lastname@example.org.