Managing Business Growth

Managing Business Growth

A typical successful business goes through various stages fromSeed to Start-Up, from Growth and to Maturity. Each of these stages has its unique set of characteristics and challenges.

It starts with seed, when an idea of providing a service or a product is conceptualised. The idea begins to take form and shape when it is being converted into a business plan. However, an idea will only look and sound good on paper until the risk is taken, that is when monies are invested and the business plan gets executed. At that point, the business is born. 

During the start-up phase of the business, the entrepreneur typically focuses on bringing home the bacon. Other aspects of the business are often not given as much attention due to lack of resources or time. As a result, when the business moves on to the growth stage, it will find that there is lack of backend business support and infrastructure that can keep up with the growth of the business.

The flaws in management systems that develop over time begin to stifle business growth. The business experiences inconsistent product or service quality and logistical bottlenecks. The lack of systems that used to work most efficiently during the start-up phase is now draining valuable resources and affecting the productivity of the business.  

Eventually a tipping point will be reached when these "cracks" cause the business to lose its momentum. In extreme cases, the entire system will collapse under its own weight. "Growing pains" become a cliché in these organisations.

It becomes a necessity, for survival's sake, to manage the business growth in a manner that will allow the business to reach the established stage in the least painful way.

An entrepreneur can manage growth in the following ways:

1.   Create a scalable management model

In the beginning, management and quality control may be easy in a business with few employees. As the business grows, a scalable management and quality control system should be developed. A clearly defined management structure must be put in place to ensure a clear reporting structure and accountability. The organisation structure will continue to evolve as new departments are created and more employees join the business entity.

 2.  Define a quality control system

As a business grows, it is very easy to lose control with more employees and the entrepreneur who may be busy handling daily issues that comes with growth. Therefore, it is important to ensure that quality control in every aspect of the business is not compromised. The business must look into a tailored quality control system and assign designated persons to assume the responsibility of maintaining the system.

3.   Execute the systems 100 percent of the time

Having created a scalable management model with a defined quality control system, it is time to make sure they are executed. The entrepreneur should lead by example and expect those systems to be executed without deviation at all times. It is easy to give in to exceptions and when that happens, flaws are introduced into the systems, indirectly signaling to everyone that it is acceptable not to abide by the quality control systems. Over time, such quality control systems are bound to fail.

4.   Manage your cash flow

Profitable businesses have been known to fail due to failure in cash flow management. As a business grows, more cash is needed to build capacity and fund working capital, which includes providing credit terms to customers and keeping inventory at an acceptable level. The fixed cost of the business also tends to increase and the business may have loans to repay. It is extremely important to manage the cash flow carefully to ensure that you are able to pay your operating costs and bank instalments on time.  In any business, it is fundamental to understand the various sources of cash flow and monitor your cash flow position regularly.

5.   Develop Key Performance Indicators for Your Business

What one cannot measure, one surely cannot manage. To support business growth, every business must establish for itself a set of key performance indicators (KPIs) to track its performance or growth. Think of each KPI as a meter or gauge to provide you with snapshots of the business periodically. For a retail business, one of the KPIs could be sales per square metre of retail space. For a stockist, a KPI could be inventory turnover days.  In establishing the KPIs for your business, remember that the KPIs must be objective, measurable and reflect the key drivers of your business. KPIs can also be relevant for benchmarking against other similar businesses, to see how your business is faring as compared to the other similar businesses.