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Strategies for Effectively Managing Business Growth

This article picks up where we left off in the ABC Business Consulting Article on Small Business Success and Failure. Having identified why some small businesses succeed and others fail, we will take this concept a step further about what you can do to successfully manage and grow your small business. The Small Business Success and Failure Article established that effective planning provides the foundation from which to start and/or expand a business. With a Business Plan in hand and its implementation into the business successful, we will provide strategies in this article how to grow a young venture, as well as discuss effective management strategies to employ for maturing companies.

Managing the New Small Business

  • Overview

A young business is characterized as being a “venture” and entrepreneurial” in nature. To take a viable venture and make it a growing concern, the entrepreneur must employ effective management strategies. Without effective management, a young business venture cannot become a successful early stage company no matter how exceptional the entrepreneurial concept, how much funding in its coffers, how exceptional its products/ services or how great the market demand is for them. It takes effective Strategic Management for a company to become successful and grow. In this article we will provide some strategies to employ in order to increase your small business’s success, whether it is a fledgling venture or a growing young business. In our opinion, this is the foundation to successful Strategic Management and should be part of any small business operation, no matter its growth stage.

  • Market Driven
  • By not being completely focused on a defined market, market segments and market niches, a young venture opens the door for competitors to invade its market and take share.
  • Competitive Edge can only be maintained if you understand the trends happening in your market on the customer level. What many young companies commonly mistake is the concept that a product and service is defined by the customer, not the Company. Product Development and Marketing should be customer-centric.
  • The function of a Marketing Plan is to perform in depth analysis of the market to determine what customers need and want. A venture may have an idea how to market its products and services but after performing in depth, customer level market analysis, it often finds different markets, different used and requirements then originally envisioned. A good Marketing Plan has a system to define and examine market segments and niches so an entrepreneur’s “assumptions” can be verified and, most importantly, challenged.
  • It is not unusual for a venture to determine that it needs changes to its products and services because its Market Analysis found its assumptions unsustainable or uncompetitive, as well as, identifying other market niches not originally planned for.
  • However, market focus does not stop there. In fact, it is just beginning because a venture must be continually analyzing market trends and be carefully listening to its customers, so it can anticipate changes in the market in time to adapt and keep its competitive edge. A new venture should spend a lot of time out in its market place, with its salespeople and customers, to understand future market trends. This is what good Market Planning and Strategic Marketing accomplishes.
  • Resource: For a Step by Step Guide & Workbook on creating an Effective Marketing Plan, please consider our E-book: The Comprehensive Business Planning Workbook- A Step by Step Guide to Effective Business Planning.
  • Accurate Financial Forecasting
  • For a fast growing, young, small business, inadequate financial focus, analysis, planning and policies are a kiss of death. Many young companies focus primarily on Profits when they should be concerned with Cash Flow, Capital Management and Budget Control Systems. Without these three components, profit and loss projections are baseless as over time issues compound within these neglected areas, causing profits to ultimately decline.
  • Cash Flow:

As we pointed out in our article on Cash Flow Management, sustainable profits come from good Cash Flow Analysis, Cash Flow Budgeting and Forecasting, and Cash Flow Management.

  • At any point in time a growing company should know 12 months in advance how much cash is required to sustain its Business Plan. This gives a growth company time to generate cash, as well as, raise the necessary capital to sustain growth and profits.
  • A growing venture needs to generate contingency cash in its Cash Flow Budget, along with retaining consistent earnings over time and having credit facilities available to seize market opportunities as they present.
  • Capital Management:

The well known business guru, Peter Drucker, maintains a new venture outgrows its capital structure in every 40-50% sales increase, necessitating changes to its Capital / Finance Strategy.

  • As a company projects its Cash Flow Budget forward 12 months, one of the important components of this process is determining how much cash the Company will have on hand at the end of the period, what finance facility is in place to make up the necessary deficit in cash needs and ask the question of whether a different capital facility is necessary to continue.
  • A Company’s Financial Strategy is intractably linked to its Cash Flow Management and completely necessary to define in order to sustain growth from one period to the next.

Resource: Please visit Business Finance Tips for comprehensive articles on Capital Planning, Management, Strategies and Acquisition.

  • Control Systems:

With effective Cash Flow Forecasting, Budgeting and Management in place, along with an established Capital Management Plan, a growing company needs excellent Control Systems in place to manage costs, which as we indicated in our Cash Flow Management article, is an important element in Cash Flow Budgeting. This Control System is also a part of a Company’s Profit Analysis when “controlling” and examining certain expense areas, such as, payables, inventory, production, administration, service and distribution. Profit Analysis & Cash Flow Analysis should be linked, understanding the relationships between cash generation, profits and expenses.

  • As a Company grows, it is important the Control Systems grow with it, making changes as needed, just like with the needed changes in the Capital Strategy (as previously discussed).
  • It is critical to prioritize essential Control areas to the particular business. Areas to consider and prioritize include Product Quality, Service, Receivables Management, Overhead, Inventory Planning, Production Costs, among others, depending on the type of business.
  • Control Mechanisms need to be forward-looking as you can’t control past expenses and profit zones. They can provide valuable clues but more important is focusing on Control features into the future. As you plan advance Cash Flows, Control Planning should piggy back.
  • Market Planning & Strategic Planning:

Accurate, realistic Financial Forecasting must come from good processes in Market Analysis, Marketing Strategies and Strategic Planning.

  • An accurate Market Analysis with good realistic information on the market segments and niches paves the way toward successful, believable and realistic Financial Forecasts.
  • Good market analysis produces an effective, forward-looking Marketing Strategy, which is implemented through a company’s Strategic Plan.
  • A Company’s Strategic Plan does many things:
  • Implement Controls
  • Link Marketing information to Financial Forecasts
  • Establish clear Competitive Edge
  • Analyzes Risks & Threats
  • Produces Budgets and Sales Forecasts

In other words, the Strategic Plan is the essential process to effectively produce solid and accurate Cash Flow and Sales Forecasts, including Controls, which result in successful Cash Flow Management and Profitability. The important point to understand, accurate Financial Forecasting, and all that it encompasses, is a relationship process and speaks to a Company’s Business Plan Development & Implementation Process, System and Structure.

Resource: Please refer to our Comprehensive Business Planning Guide & Workbook for a step by step process in developing the necessary elements of a successful Business Plan.


This article is an excerpt of a Chapter from our Business Success Guide. For the rest of the Chapter, please visit:  The Business Success Guide

The remaining major sections of the book’s Chapter have been left below as an outline so you can get an idea of what else is contained in this Chapter of the Business Success Guide.


 

  • Effective Management Structure & Resources
  • It is important to note that Management is a two-prong concern for young companies….
  • Management Structure:
  • Management Resources:

Managing the Maturing Small Business

  • Overview
  • Small Business Growth Stages
  • Basic Existence Stage:
  • Survival Mode Stage:
  • Obtaining Success Stage:
  • Rapid Growth Stage:
  • Maturity Stage:
  • Management Considerations & Challenges
  • Key Management Factors/ Areas:
  • The Role of Business Planning:

Future Planning

  • Growth considerations:
  • Application

Conclusion

An imbalance of management factors and challenges can …

The Case for a Business Consultant

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