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As we all know hundreds of small businesses start up each year. And for all the optimism, good ideas, and best intentions, many also fail. According to BDO Stoy Hayward Industry Watch there is “a rate of 0.9 per cent …failure, or the…equivalent to an average of 310 businesses going bust per week.” There are many reasons why businesses “go bust”, but one is clearly the failure to grow or grow in a strategic manner.
Whereas there is no one size formula for busness expansion, there are guidelines and principles that will help steer management in the proper directions. Much the way the business was started, now is the time to use the same types of tools for growth. For example, at startup a buiness plan or roadmap was concieved and followed. Now is the time for a growth roadmap. This may be expansion, acquisition, or additions to offerings, but the plan must be realistic with executionable steps. Some other ideas in the planning stages of growth are: setting business targets, improving current processes, creating a robutst marketing strategy, deciding what if anything can or should be outsourced, not underestimateing the importance of knowledge, and creating the infrastructure for growth.
Next is to determine how the growth will be financed. There are many ways to finance the growth aspect of the business. It is always best to check with the company banker and/or financial advisor as to what is best for the individual business specifics. However, here are some examples. Equity finance is one option for growth capital. Much the way equity in an individual home works, so does the equity of the business. Borrowing against the equity for expansion is certainly an option. Another popular form of financing, particularly to e-commerce ventures, is the IPO or initial public offering. This is a major undertaking for most small businesses, however, the payoff may be worth the intensity. Shares and shareholders are another option for growth financing. Whether the company is public or private, granting more shares for a price or adding more shareholders can open the door to an influx of capital needed for the expansion process. In summary, be sure to obtain the “right financing” for the business needs. Not all of these options are prudent to all businesses, and there are still more options not listed here.
Now that there is a plan for growth and the financiing is in place, take a couple of more steps before pulling the trigger on execution. Remember we mentioned infrastructure? People, processes and technology must be reviewed for the next steps. And let’s not forget that as people, we all resist change. So what can be done to ease these areas of pain?
According to Business Link Research there is a “Checklist for IT Infrastructure Growth” to make sure you are ready. Here is the list:
. identify your key processes
. identify any bottlenecks in your systems that cause problems
. find out your customers' and suppliers' requirements
Ø get a full explanation of the different technical options - from an independent expert if necessary
. assess all the long-term and hidden costs and benefits of each option
. take into account limitations such as your employees' IT skills and your budget
. take independent advice if necessary and get help with systems integration
. prepare a thorough brief for your potential suppliers
. put a contingency plan in place if you are tied to one particular supplier, in case there are problems
. formulate a clear agreement with suppliers on what the solution will achieve
. check whether the deal includes on-going support from the suppliers
. decide whether you prefer gradual implementation or a "big bang"
. create a realistic budget, including resources for training
. set a realistic timetable, including time for testing
. allow for unexpected costs and delays
. plan how you will involve employees and overcome resistance to change
. acquire the expertise to manage the project – e.g. via project management training or hiring a consultant2
Finally, do not underestimate the need for change management and leading the staff through growth. Reorganization, restructuring and other major changes are quite disruptive to the workforce, even if for all the right reasons. Internal or external elements may be the cause of change, but still the business needs to remain competitive to survive. Some ways to help the workforce cope are to implement staff incentives during the restructuirng period. Perks and incentives can often ease stress if it is seen as appreciation during a hard period. Be sure that the management team is not being negleted and they are being developed and educated through the process. This will not only allow them to be involved and be of value, but they will then be equiped to help the business grow. Finally, create personal devleopment plans for staff and management. A development plan will put “skin in the game” for the employee as well as the business. The old addage of the business is only as good as it’s worst employee still rings true.
So remember, plan for a growth strategy that is also realistic and executable. Obtain the financing that makes sense for the individual business and the target goals to accomplish. Be sure to prepare the business infrastructure for the growth and changes that will be coming. And don’t forget to have a change strategy in mind for the employees and the never ending fear of change.
Reference:
1. Business failures fall to record lows
Posted December 29, 2004 RSS newsfeeds www.bytestart.com
2. Business Link: Practical Advice For Business
www.businesslink.gov.uk/bdotg/action/layer?topicId=1074404796&r.s=tl
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Introduction
