Growing Your Business

People enter business for a variety of reasons. Some want to get rich, others want to be their own boss, others want to change the world. When people start a business they anticipate growth. However, few actually consider what needs to be done or what they want to achieve in growing their business.

Growth has traditionally been regarded as the stage of the business life cycle that follows market entry. To advance to the growth stage, and stay there, all the challenges and changes caused by sustained growth must be well managed. This is no easy task. Growth means changing how you do business, investing in new technology, more employees, less centralized control and likely the need for more money.

To succeed in business you need to be constantly aware of what you are doing and of the changing market place. You must respond or, better yet, lead the change. When you are looking at expansion it is with an eye to the future, but it also requires confirming what your core business is and building on that. You need to drop products or services that are no longer worth pursuing to have the resources to channel toward growth initiatives.

It may not seem like a quantum leap to grow, but people who have added a new location to their business talk about how amazingly difficult the challenges were.

Have a plan

When you started your business you likely created a business plan which mapped out the strategy and demand for your business and what you would do to be successful. A Business Plan is not intended to be a "one-off" rather it is a tool that you should be reviewing and reworking throughout the course of your business. As your business rolls along it is essential to be vigilant in tracking how your business is doing financially and in the market. How are sales doing? What products are growing in demand? What products/services are showing decline and why? Are there new trends or products on the horizon that you should adopt, or that could challenge your position in the market place? Are there any new products or services or variations that you could bring to market? These are questions you should be asking. Have goals for what you plan to achieve with milestones and anticipated outcomes to evaluate your performance.

Prior to embarking on plans for growth, it is essential to ensure that your present operation is running as effectively and efficiently as possible. If it isn't, adding the extra challenges and expenses that growth entails may threaten your efforts or even the viability of your company. You must be solidly rooted financially and have good management and financial systems in place or the shortcomings will be exacerbated as you grow.

Ten Most Common Growth Mistakes

Here are the 10 most common mistakes made by entrepreneurs as they plunge into their first business.

1. No growth plan
   
   
   • A business cannot operate or grow without a well researched plan
2. Wrong business, wrong location
   
   
   • Poor choice of location or business that doesn't suit their interest or temperament
3. Lack of technical skills
4. Lack of sales and marketing skills
5. Lack of financial management skills
6. Undefined financial resources
   
   
   • Growth can be a slow process taking years, many businesses start on a shoestring (inadequate) budget
7. Lack of market research
   
   
   • Most people don't spend enough time learning about their market and competition and responding effectively to both
8. Investing in trendy businesses
   
   
   • Many people jump on the bandwagon of trendy businesses without researching their longevity. A business should have a projected life of at least 10 years. Study future trends to ensure you are filling a long term niche. Cater to long term trends -- Think of ways to diversify and cater to a growing business trend
9. Over-projecting sales, under-projecting marketing costs
10. Professionals are not consulted
    
    
    
    • Accountants and lawyers can be valuable advisors and assistants in times of trial. Few small business owners develop a relationship with these potentially valuable allies.

Source: Big Ideas for Growing Your Small Business, Frances McGuckin, 2001

Reasons For Growing

Every business owner wants to run a successful business and see it grow. However, in addition to the gratification that comes from seeing your business succeed, there are other reasons for pursuing business growth. As businesses grow they can benefit from economies of scale to reduce operating costs. Generally, the larger the volume of production the lower the cost per unit to produce. Also, the higher the volume of sales the lower the margin needed to be profitable.
By increasing your share of the market you can achieve some control over such variables as the market and pricing. Adding new products or expanding into new markets can diversify your business and help you better weather tough times. If you have a variety of products or services, when the demand for one is down, the other products may help to offset that drop.
You may be very happy with how things are going with your business and see no need to grow. However, in the business world, as in life, if you aren't moving, changing and improving you may not be alive. Businesses must be analyzing the present and consider the future. To meet the changing business world and market, plans must be made in order to survive as well as grow. A company that isn't growing may become complacent, lazy, and unable to adapt and eventually become incapable of operating.

Ways to Grow Your Business

It can be tempting to try to grow in all areas at once. However, this can be difficult to achieve. Focus on the kind of growth you can manage rather than attempting to achieve everything at the same time.

• Sales Volume
  Most businesses judge their success by an increase in sales volume. This can be a good growth oriented strategy to pursue. What strategies could you pursue to increase sales?
• reduce price - more marketing - add products - open second location Remember, do not sacrifice profits to gain sales!
• More Customers
  It can be possible for too many sales to be coming from a few customers. Customers can change their buying habits. Adding new customers is an essential consideration in planning business growth. Advertising and marketing can help you develop new customers as can good customer service (word of mouth promotion).
• Increase Production
  Do you have the capacity to increase production? Take on more contracts? What will be the cost/resource implications of doing so?
• Internet Marketing
  The Internet might offer some cost effective opportunities to promote your products or services or expand into new markets. See E-Business : Getting Started for more details about this vital marketing opportunity.
• Value-Added Services/Products
  If you can slice up your market or service area finely enough to see a potential for dominant market share, then increasing market share may be the way for you to grow. When you become one of the dominant players in a market you can have more control over the direction of the market.
• Increasing Profits
  In some markets it may not be feasible to seek growth in sales volume. In this case focusing on products or customers that provide higher margins can increase your profits without increasing your target market. Cutting costs or raising prices modestly may be able to increase profits.
• Growing Your Work Force
  Adding staff or sales personnel can increase production capacity or sales growth. However, with added staff comes the need for additional training, supervision and motivation. New staffing must always be justified by an increase in sales volume as well as profits.
• New / Additional Products
  Growth based on new products, particularly "hot' new products, can yield revenue that is both fast growing and highly profitable. Watch the marketplace or investigate other sources to identify new products with potential. Try to stimulate innovation within your organization to create new products or services.
• New Markets
  Finding a new market whether in a new neighbourhood, new town or new country can be effective in achieving growth. Market research will be required to determine the suitability of various markets and to enable you to effectively compare different options. Investigate government agencies and sources of information to assist you with your market research and analysis.
• Adding Locations
  For many businesses sales are likely to be the same at each location so opening additional locations can be a way to grow. However, as with finding new markets, this option can add stress from additional staff and other challenges inherent with new and remote locations.

Other options for growing your business:

• Licensing
  The licensing of patents, trademarks, copyrights, industrial designs and other intellectual property to others can be a fast and profitable way to grow your business. Licensing enables you to tap the existing production, distribution and marketing systems that other companies have developed. In return, you get a percentage of the revenue from the products or services sold under your license. The negative side of licensing is that you get a "smaller piece of the pie".
• Franchising
  Franchising has emerged as a very popular expansion strategy for business. Sales from franchise outlets make up approximately 30% of all retail sales in Canada. To franchise your business you must have several years of successful operation to your credit. A franchisor normally receives an initial franchise fee, and a continuing fee, a royalty, that represents a percentage of the sales generated by the franchise businesses. Franchising can be a low-cost way to expand, but it is also likely to be a low profit way. At least initially, the effort and cost involved in development, marketing and training of franchise operations reduces profit. Also, the Franchisor is often required to commit to a substantial marketing program on behalf of all franchisees.
  
  
  
  • Reasons for Franchising*:
    
    
    
    • To obtain operating efficiencies and economies of scale,
    • To achieve more rapid market penetration at lower capital cost,
    • To reach targeted customers more effectively through cooperative advertising and promotion,
    • To sell products and services to a dedicated distributor network,
    • To utilize motivated owner operators instead of internal personnel,
    • To shift some of the responsibility for site selection, training, personnel management, and advertising to the franchisee, licensee, joint venture partner
    *Source: Running and Growing Your Business, Andrew J. Sherman
    For more information, consult "Franchising Your Business"
    
• Acquisitions
  One way to achieve "instant" growth is to buy another company. Companies acquire other companies to increase market share, gain access to promising new technologies, to tap new distribution channels, to gain control of undervalued assets and for a variety of other reasons. Depending on how the takeover is implemented there can be many challenges in integrating with or operating the additional company.

Challenges to Growth

While you want to succeed and are eager to grow, growth can have its hurdles and challenges.

• Financing Growth requires money and that is one of the challenges most businesses and especially new businesses face. Plant expansion, purchasing new or additional equipment, hiring and training new staff, expanding into new markets -- all require funding which may not be available within the company. To enable your continuing growth you will have to explore your financing options: line of credit, term loan, financing, selling equity to investors, venture capital.
  To secure financing you will have to demonstrate a successful track record. This means you need good records of past performance, detailed market research, a well thought out and presented business plan and projections to make a convincing case to your potential investors/lenders.
  
• Competition The competition you have in your market can also be a limitation to growth. If there are many competitors, or strong competitors, you may have a challenge to increase your share. Careful analysis of the current market and a careful assessment of how to take advantage of your strengths and minimize your weaknesses will be required. What can you do to differentiate yourself from your competitors and win the confidence and loyalty of customers?
  
• Market Size There are limits to every market. You cannot sell more than your customers want to buy. If the market you are in is too small to meet your goals you will have to explore new markets, switch markets or find a way to improve your competitiveness in your existing market to continue to grow.
  
• Labour Supply Sometimes business growth can be hampered by a lack of sufficient or adequately trained staff. Careful planning and foresight can ensure that you have a workforce available to meet your needs for growth. Training, development and recruitment of staff can be critical to the future success of your business.
  
• Personal Limitations You cannot do it all! As a business grows it is impossible for one person to manage all aspects. As your business grows you will have to relinquish control to staff and consult with expert advisors to help you with your operational and planning decisions. Many "new" entrepreneurs find it hard to "let go".
  

What Makes a Company Succeed and What Positions it for Success...*

• Study the success of others
• Study your competition
• Gather and analyze information in the four areas strategic to your business - finance, customers (develop a profile), your industry (what other are doing and how) and your market (what the trends are)
• Know who your best customers are - and treat them accordingly
• Hire professional help when you need it
• Use the best tools available
• Solicit suggestions from employees
• Give your employees what they need to get the job done
• Be a role model for your employees
• Be a boss, not a buddy
• Develop a good relationship with your banker
• Learn to network
• Learn how to compile and analyze financial reports
• Concentrate on your niche and what it does best
• Be willing to do what it takes to improve
• Sharpen your marketing skills
• Eliminate waste
• Know when it's time to make a change

* Source: The Small Business Owner's Guide to a Good Night's Sleep, by Debra Koontz Traverso.
Sources used in preparing this article:

• Big Ideas for Growing Your Small Business, Frances, McGuckin, McGraw-Hill, 2000
• Complete Guide to Running and Growing Your Business, Andrew J. Sherman, Random House, 1997
• Growing Your Business, American Entrepreneurs Association, 2001
• The Small Business Owner's Guide to a Good Night's Sleep, by Debra Koontz Traverso