Managing and sustaining growth
This involves creating a business that can handle its escalating growth. Important concerns are the business’s people, controls and financing. In order to sustain growth it is necessary to strategically plan. To do this effectively it is necessary to know what growth stage a business is at. Meeting the challenges of sustaining and managing growth requires time and resources which typically are scarce at the time that they are most needed. Managing growth is critical to prevent business failure. As is developing a culture which motivates and guides your employees.
The controls that you set in your business will have a large impact on its cash position. It is critical to pay constant attention to your collections policy to ensure debtors pay on time and reduce bad debts. You need to be on the look-out for inefficiencies. Managing costs requires both making decisions on expenditure and creating controls that monitor spending. It is also useful to analyse performance in different product or market segments and the effectiveness of expenditure. Significant changes in the metrics of any business should instigate a search for causes and an examination of the need for adjustments in the business policies. Over time as a business matures and has more resources it can start to develop and benchmark itself against a formal budget or plan.
We all know that ‘Cash is King’ and there are various strategies that you can adopt to improve your cash flow from early collection and negotiating later payment terms with suppliers to taking the opportunity to value price rather than set pricing. It is also necessary to continually find creative ways to generate cash by increasing margins. Think “What does my product cost? How can this be reduced? How can my overhead minimised?” Whilst it may not always be possible to fully protect the cash position what should be avoided is being surprised and having to adopt a reactive approach. What is most likely is that a growing business, at some point, will need to look to additional sources to finance growth. It can pay to be creative when searching for funding, if the bank is unwilling to loan monies a supplier may or it may be that equipment can be leased or asset finance obtained or a private equity investor fund.
We can help you every step of the way of your business journey. We can help to identify when you need to spend more time on strategy and help you to devise that strategy. We can act as an outsourced finance function to provide you with timely financial information. We can help you in devising policies to recruit, retain and motivate your staff. We can help you to put in place controls and create the metrics that you need in order to monitor the performance of the business.
As a business develops there comes a point when strategic planning needs to be formalised. It is not enough to ‘do what you always do’. Customer needs evolve, markets change, competitors will introduce new products and services. A growing business needs to be continually thinking about how it will compete in a changed environment. Failing to engage in long term planning is likely to lead to an eventual slow-down in growth. Although it can be easy to blame sales, without new products or new strategies, revenues from existing sources are bound to level off. To create an effective strategy it is necessary to know about conditions and changes in the external environment and also to have an awareness of the internal capabilities of the business. This will enable the business to identify areas where it has the capability to pursue an opportunity that will create an advantage in the wider commercial world.
Change in strategy may also be internally driven by stakeholders such as a greater return on assets, expansion or diversification.
It is important to remember that although you may consciously formulate a strategy it may not evolve as you planned. Strategic planning needs to allow for learning and feedback and the interaction between internal capabilities and the wider external commercial environment. It may be a good idea to create a function that gathers and monitors external information allowing you the chance to examine trends and opportunities as they arise. Carefully selecting members of the board of directors and making them key participators in the strategic planning process can provide alternative perspectives and additional expertise.
Strategic planning is not just about planning though. It is also about effective implementation:
- How you communicate the objectives within the business
- How management implements and oversees the execution of the strategy
- How each functional unit aligns itself with the objectives and the development of performance measures to assist in decision making
- Being flexible enough to change your plans in the face of feedback and allow for experimentation with new ideas and use information to modify the strategy