Growing
a business is so consuming that many business owners
get strung out and exhausted with the day-to-day details.
Controlled growth is great. Out-of-control growth (missing
deadlines and
customer commitments, running out of cash … )
can be disastrous.
Here
are the “top ten” tips
for achieving profitable growth.
1. Implement Systems
Systems are the infrastructure for growth. Systems apply to
all aspects of your business, from accounting to human resources
to project management to quality control. Systems of 'internal
controls' are like checks and balances that help ensure that
the business stays on track.
Systems reduce stress and make workloads more predictable
and manageable. They also help when you need to replace departing
employees, because all the knowledge of the job does not walk
out the door with the departing employee.
2. Hire Qualified Employees
Who you hire is a difficult decision. Before you start
interviewing, carefully consider what your business
needs. What isn’t
getting done well? What’s holding your company back?
Interviewing Dos:
- Communicate clearly what is expected in the job.
- Strive to have the candidate talk 80% of the time.
- Ask open-ended questions.
(e.g., What was your most/least successful assignment? What
kind of obstacles did you encounter and how did your overcome
them?)
- Listen carefully.
Is
there a "Good Fit"?
Is there a match between the company's job expectations
and work environment, and the
candidate's interests and abilities?
Growing
companies need to be especially careful to protect their
confidential information and intellectual property. Your
systems should include confidentiality and non-solicitation
agreements with your employees and “work for hire” agreements
with your contractors.
3. Train Employees
Employees cannot read your mind. Hiring someone requires your
investing in training and supervising that person's work.
Training is critical to employee productivity.
4. Implement Technology to Support Employees and Operations
Give your employees the tools they need to do their job effectively.
Flowcharting - or diagramming your current business operations
- is a good way to get a visual picture of how business is
currently handled. Your systems, (e.g., computer, network,
applications, telecommunications, accounting) should be carefully
designed and implemented to create a competitive edge. Ad
hoc or poorly implemented systems drain productivity.
5. Improve Quality
Quality, delivering a consistent customer experience, can
suffer with growth. It’s important to maintain quality
and consistency in the delivery of products and/or
services. Listing the specific steps that are followed from
the start of a customer transaction through completion of
an order or project helps to establish a consistent way of
handling transactions and eliminating bottlenecks.
6. Plan for Employee Turnover
Would the departure of a key employee leave a project completely
up in the air? Frequently, as the volume of business increases,
the few employees who know how to get things done cannot
sustain the pace of growth. Just adding more employees doesn't
help unless the new employees have a clearly defined role.
Systems, including written project plans and procedures,
help new employees get up to speed quickly.
7. Increase Customer Satisfaction
Listen carefully to employees about problems and take steps
quickly before customers are impacted. Once customers are
impacted, you must fix the problem and learn from the experience.
Customer complaints and lost customers provide valuable insight
into what your company needs to do to increase customer satisfaction.
8. Increase Competitiveness
To stay competitive you need to maintain perspective on
the competition. You need to see the big picture, or
'forest,' as well as the 'trees' (details & issues).
Stay current on:
- What is important to your customers;
- What is happening in the marketplace;
- What your competition is doing;
- What your company is doing well; and
- What your company needs to improve.
9. Sell to new markets
Be careful not to become too dependent on a few customers or
a single industry. There's a rule of thumb that 80% of your
profits come from 20% of your business. Is this true for
your business? Analyze your customers and determine your
ideal customer profile, for profitability. Also, be prepared
for the inevitable shift in the market. What if your top
3 customers were acquired or disappeared?
10.
Maintain Positive Cash Flow & Control
Costs
Growing businesses 'burn' cash. Running out of cash is
the most common reason that businesses fail. Here’s a vivid
example of how quickly cash can disappear and leave you in
a crunch. Imagine yourself in a small car (revenue) being
tailgated by a big truck (expenses). If revenue slows even
a little, expenses (which are much harder to slow) overtake
revenue, and it’s a cash crunch. So, spend cautiously.
Get paid promptly (collect those accounts receivables).
Expand only when revenue projections are solid. Systems
help you maintain positive cash flow and control costs.
In
conclusion, growing your company profitably requires building
a systems infrastructure that can sustain higher
volumes. Based
on my experience, outsourcing is an effective way to handle
certain aspects of your business as it grows, so that you
can focus on your core “value added.” Whether you’re
outsourcing accounting, manufacturing, or order fulfillment,
it’s wise to have a contingency plan for handling
any problems that may arise.
Jean D. Sifleet, Esq. CPA
Business Attorney
120 South Meadow Road
Clinton, MA 01510 USA
978-368-6104
jean@smartfast.com
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Jean Sifleet, business attorney, CPA and three-time entrepreneur, is pleased to announce the release of her new book, Advantage “IP”: Profit from Your Great Ideas. Visit the Smartfast Bookstore for details, and to order the book.
