This month, we sit down with Peter Dickinson, founder of KUB Business Growth. Peter operates as a business growth coach and interim director/manager; over the last 15 years, he has advised over 300 businesses across numerous sectors, helping them to achieve sustainable growth. He is also involved in a variety of businesses in directorial and managerial capacities.
Here, Peter fills us in on the importance of planning for growth and what businesses can do to make the process smoother and easier.
How might a business establish that it is the right time to expand? Should it consider things such as market opportunity, its competitors’ activity, and the benefits of scale?
A common mistake a lot of growing businesses make is that they don’t consider how the business will scale. You should consider its products/services, processes and people; these core components should be reviewed to determine whether you can scale or not.
If one is not ready then the business will fail to scale and grow. It helps to have market opportunity but most successful entrepreneurs simply look at how they can stand out. They surround themselves with people who believe in the vision and work hard towards their goals. The better ones have clear objectives and prioritise those projects/tasks that will move them closer to their goals, making them fearless in their execution through total belief in themselves and their team.
In a previous post in this series, we covered tips for writing an initial business plan. How do growth plans differ, and what core elements should they contain?
Your growth plans need to be simple and agile. For me, this means using mind maps that encompass the key concepts, and translating them into financial models that capture assumptions and key variables.
Your growth plans should include targets for turnover, gross and net profit. Show how the organisation should develop and have vacancies for the ‘A-Team’ players even if there isn’t funding to support them at the current time. I keep track of the dates when it’s likely that the vacancy should be filled, and note the required funding to support the acquisition of key players in the team.
A growth plan should document market intelligence, where the opportunities are, and how and when they will be exploited. If expensive resources or specialist skills are required then these should be considered and documented. Typically, it takes a couple of three-hour sessions to fully capture the key points of a growth plan.
Which financial measures, forecasts and economic analysis should be put in place to ensure growth is realistic and sustainable? How can success be measured?
Success is measured against what targets you set yourself. If you are in a new market with a unique offering, then you need to stay ahead of new entrants. Otherwise set yourself a target of turnover in three years’ time and what gross and net profit you require. These are the successes you need to measure yourself against.
Also, there is no right time to start a business. I have worked with a number of entrepreneurs who have started a business in a recession; most entrepreneurs look for opportunities rather than worry about macroeconomics over which they have no control.
What steps can businesses take to identify and anticipate risk relating to growth, and how can they plan accordingly for threats?
Taking risk out of your growth plans involves planning. If you fail to plan, you are planning to fail. The top priority for any plan is to have the best people you can afford and to create a collaborative culture to reduce staff turnover.
Second is having a business model that generates cash. If that’s not possible, acquire access to finance; as you grow, cash will be consumed through both resources and working capital. Many a successful, profitable business has failed because it has overtraded.
How should a business decide which is the most appropriate way to fund its expansion, i.e. whether it should diversify with new products and audiences or make its existing activity more profitable?
There is a simple strategic planning tool called the Ansoff Matrix. It shows the different level of risk for different marketing strategies. Market Penetration (selling the same things to more of the same customers) is undoubtedly the lowest risk approach and should be top of your list as a growth strategy.
The next two, selling the same products to a different market (Market Development) or new products to the same market (Product Development) should be considered as they are medium risk. Diversification (selling new products to a new market) is very high risk and, in my view, should be avoided.
My favoured approach above Market Penetration is Product Development since acquiring market intelligence can be expensive. On the upside however, selling into a new sector does protect the business in a downturn.
Growing a business will inevitably prompt a degree of organisational and cultural change. What steps can owners take to ensure their core values are kept intact during this transitional period?
The culture of a business needs to be actively managed whatever stage you are at. Organisational change is inevitable with growth and good communication needed to keep everybody going in the same direction. This means personal reviews, personal developments, clear objectives from the top, daily stand-up meetings, monthly short ½ page bulletins from the founders, ‘meet the boss’ meetings etc. There’s no such thing as over-communicating.
Find ways to celebrate together too. Humans are social animals, not machines. This can mean the occasional bought-in lunches to allow teams to network informally or things like ice creams and barbecues in the summer. Get creative with your socialising.
The key to managing the culture is to make it explicit without imposing it. If you don’t like the culture that has been identified then create a culture that you want. As the leader, the culture of the business starts with you. If you don’t like it change it.
What key things do businesses need to think about when planning to expand overseas?
The hardest thing that most entrepreneurs face when expanding overseas is the problem of understanding the target countries’ marketplaces and cultures. The Government Dept. for International Trade should be the first place to go if you are looking to market products overseas. A number of clients have found attending international exhibitions and conferences useful, too.
Ensuring that you have sufficient time and money without the distractions of domestic affairs is important. Be mindful of currency fluctuations too, as these can make pricing and financial management more challenging.
What do you feel are some of the biggest misconceptions that businesses have when planning for growth? How might these be remedied?
Most businesses I have met let growth happen to them, or worse, hope it will happen to them. A major misconception is that the next big order is just around the corner and the business will simply grow by waiting.
If you want to grow, you need to have clear objectives on what you want to achieve and by when. Then put together a plan and execute it. A lot of businesses fail to grow because of poor execution. They have the vision but then procrastinate. Set two or three clear objectives each quarter, work hard to meet them. Do that four times a year and the business will grow purely on the marginal gains made each quarter.
If you’ve enjoyed this article, don’t forget to read the rest of the Q&As in our Business Basics series. You can find a selection of recent articles using the following links:
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