Small businesses are a happy bunch right now. According to the 2015 Small Business Growth Index Survey, many are experiencing a surge in confidence fueled by economic growth, and 99% of those surveyed expect revenue growth this year.
But optimism aside, many businesses find their growth plans thwarted at every turn. Whether it’s due to cash flow issues, access to working capital, or supply chain problems – take your pick! Surprisingly enough, one of the biggest impediments to growth is the business itself. Many businesses simply aren’t operationally ready for growth – this could because a lack of skilled labor, poor hiring decisions, a lack of competitive intelligence, and so on.
Here’s a round-up of some of the most common barriers to growth and some steps you can take to break through them:
1. Ignoring Business Indicators
Everyone wants revenue growth, but what form will it take and are you ready to grow in that area? Study your business indicators regularly to monitor growth opportunities. This includes your sales pipeline, conversion rates, and market trends. Things to look out for include success in one market or location and the potential to expand into another. Is a big sales deal on the horizon? Is your pipeline trending favorably? Is success in one area of product development opening new doors of opportunity for others?
Ignore your business indicators and you won’t be able to capitalize on the opportunity or effectively prepare for that growth when it presents itself.
2. Overlooking the Competition
Competition can be a great driver for growth if you approach it correctly. There’s no point making it your mission to be better than the competition if you don’t have a deep knowledge of where you stand against them. A powerful tool for doing this is a simple SWOT analysis. It can also help you uncover unforeseen opportunities and reveal any potential threats to your growth plans. A SWOT analysis is also a great starting point for differentiating yourself against the competition and drawing out the value you deliver that they don’t.
3. Forgetting about People Till It’s Too Late
If anything is going to help, you grow its great employees. But don’t leave it to the point of expansion before you start thinking about who can help you grow. Always be on the lookout for talent.
You might want to build a stable of independent contractors who get to know your business well and contribute on an as-needed basis. Come growth time, they should be able to step in with minimal ramp-up and help you meet your goals. Another option comes in the form of mentors. If you’re heading into new territory, wouldn’t it be great to have someone beside you who’s been there before? Organizations like SCORE (subsidized by the SBA) can match you with a business mentor for free. These mentors can bring either very specific experience (marketing or HR) or broad business skills and are located nationwide.
Check out How to Find Great Job Candidates for more tips on how to find the right people to help your business grow.
4. Not Accounting for Risk Early in the Growth Phase
Of course, you don’t get any rewards in business without taking a little risk, especially when it comes to growth. So as you plan your growth strategy, have a “Plan B” that accounts for any variables that could occur along the way that might impede growth. These could include hiring problems, manufacturing issues, cash flow challenges, patent infringements, and so on. Go back to your SWOT analysis and identify these risks or threats and think about ways you can fix or get around them. These are also good conversations to have with your mentor as well as your accountant and/or lawyer.
5. Failing to Plan for Cash Flow Issues
Now we come to the elephant in the room – cash flow. According to a U.S. bank study, 82% of all businesses fail due to poor cash flow management and as Kabbage reports, it’s a top concern among small businesses with growth plans.
Small businesses are particularly susceptible to cash flow problems, with growth comes extra cost – inventory must be procured, marketing campaigns executed, new hires paid, and so on. If your outgoings are more than your income, even for a short period, paying your bills gets difficult – fast!
So as you plan for growth, have a plan for cash flow (create a cash flow forecast). Build your business credit so that you can access financing should you need it. Ditch your personal credit card in favor a business one that you can use for large purchases (many offer 0% APR introductory offers). Explore a line of credit to tide you over during predictable operating cycles such as on- and off-seasons. Unlike a loan, which you apply for when you need it and use as soon as it’s approved, a line of credit is set-up before you need it and monthly payments don’t kick in until you dip into the cash.
Here are some more tips:
- 3 Strategies That Can Help You Survive Your Next Cash Flow Crisis
- 5 Ways to Get More Cash Flow Out of Your Business
- What’s the Difference Between Small Business Profits and Cash Flow?
- 5 Ways to Find & Fix Small Business Cash Flow Problems Before it’s Too Late
- Why Profitable Businesses Fail, and How to Fix It
- How to Create and Analyze Your Cash Flow Forecast
The Bottom Line
If there’s a common thread to breaking through the barriers to growth, it’s being prepared. Your business planning process can help with much of this. But planning for growth involves more than creating a business plan that you put in front of your bank manager. To make planning work for your business, you need to revisit as you grow. In that way, it’s less about the plan and more about planning. For tips on doing this read: 2 Easy Ways to Make Business Planning Enjoyable and Productive.