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Growing Pains in the Small Business
Success, they say, is its own reward.
In the competitive world of small business, this must be doubly true –
financial benefits aside, ‘making it’ is even more satisfying if you
have established and grown you business from the outset.
But with success comes growth
which, if not managed properly, has a tendency to quickly put a stop to
a small business’ gains.
It is natural to want to increase the size of your business once you
achieve some degree of success. However, you should expect certain
difficulties along the way.
A key challenge arises when a small business grows to the point where
one person is no longer able to manage the company alone, according to
Alistair Gordon, a partner in consulting business MentorVest Partners
and former Managing Director of Strategic Publishing Group.
“The first difficulty is there appears to be a size at which a company
is relatively easy to run … where one person is making most of the
decisions, and that size is probably ten, 11, 12 or 13 people,” says
Gordon.
“If you add a couple of people up to about 16 people, suddenly it’s not
possible for one person to make all the decisions any more, and all the
management systems that previously ran the company no longer work.”
The fact that many small business owners leave the implementation of a
growth strategy to a late stage can compound this difficulty.
“Most entrepreneurs take too
long to start training their employees to take over responsibilities,”
says Gordon, who started at Strategic Publishing Group in 1992
with four team members, ending up eight years later with 150 colleagues
in nine locations around the world.
“[Small business owners] leave it too late, and then they give people
responsibilities without training them properly, and without being there
to hold their hand when things go wrong the first few times,” he adds.
“You quite often find that entrepreneurs snatch back the responsibility
because the [other team members] haven’t handled it properly.”
After two or three false starts on account of an unprepared team, Gordon
says that he now makes sure he implements training as early as possible.
Added to the importance of full preparation is the need to properly
forecast your small business’ cash flow.
Gordon says that unrealistic revenue expectations can be fatal to a
small business, “even if it is doing well.”
“The costs almost always exceed what the expectations of cost are, and
the revenue takes twice as long to arrive as everybody anticipated,
which normally creates a cash flow problem.”
Here, Gordon’s advice is to make sure you shore up your current business
base before trying to expand.
“Prior to growth, it is really about battening down the hatches and
making sure that your [revenue] is solid, and that it’s going to be
there after you’ve gone off and spent a year growing the business.”
Pessimism, at least in controlled doses, can also be helpful to keep
small business growth in check.
“Be really pessimistic about revenue, not necessarily how much revenue
will come in, but when it will come in,” Gordon advises.
“Probably take the costs that you’ve done and add 30 percent to them,
and ask yourself, ‘If the costs are way over and if the revenue takes
twice as long to come in, will my business survive?’”
A comprehensive business plan which takes account of market demand is
also important to properly balance growth, says David Meier.
“Remember that the process of business growth is ongoing. For this
reason, you are encouraged to include both long-term and short-term
growth strategies in your plans,” Meier says.
“By continuously being attentive to growth opportunities, you can avoid
the dual risks of experiencing a reduction in your business' sales
volume and a corresponding loss of profitability.”
Finally, don’t try growth on your own. Making the most of your fellow
team members is a sure way of managing your business’ expansion – and
most important of all is your accountant, says Gordon.
He says a good accountant will keep in check the temptation to push for
growth when to do is perhaps premature.
“In a growth business, the accountant is probably the most vital person,
because the manager 9 times out of 10 wants to grow and will not be
stopped from growing.”
A good manager-accountant relationship is one based on cooperation and
an equal power balance, Gordon says.
“Absolutely the key success factor in my business was that when the
accountant said, ‘We don’t have the money for this’, the management had
agreed to listen and take appropriate action.
“If we hadn’t done that we would have gone out of business.”
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