10 Areas to Evaluate Before Expanding
Most entrepreneurs actively try to grow their business. However, the sudden increase in revenue frequently leads to significant operational problems. Growing too fast can have a domino effect throughout the company. If there is too much work, you can expect diminished employee productivity because they are under too much stress. The decline in employee morale and ability to maintain quality will negatively impacts products and services. The decline in quality causes an increase in customer dissatisfaction. To top it off, leadership may operate reactively rather than proactively and the accounting systems and operational procedures may lack adequate controls and management reports. To overcome this, it’s essential to accelerate the growth of the business prior to the implementation of the marketing strategies to grow the business.
Evaluate these 10 areas to be sure your operations can handle growth:
1. Accounting System
Does the accounting system provide the necessary financial information? Does it allow for separation of multiple revenues streams and costs? Separate reporting allows leadership to monitor and control not only the revenues but the profitability of the various revenue streams. As the business grows, the accounting system must be capable of providing the needed financial information. If not, an upgrade should be your top priority.
Does your business focus on the needs of its customer base? Are revenues too concentrated in a few industries, products or customers? What will happen to the business if those customers or products are adversely impacted by economic or other conditions? To ensure the survivability of your company, it must diversify. Develop and implement marketing strategies designed to diversify its revenues.
What core competencies of your company allow it to have a competitive advantage versus its competitors? Are they protectable and sustainable? Do they adequately address the needs and desires of its customers and industry? Have you identified areas and implemented strategies to improve its competencies? Address these issues prior to attempting to grow.
Is there significant employee turnover? Is there a morale problem? Are employees adequately compensated and fairly treated? Do employees understand not only their duties but how their efforts lead to the success or failure of the company? Are employees given and accept responsibility for not only solving problems, but also improving processes? Business growth is rarely achieved when serious personnel issues exist. These items are important and must be addressed.
Does leadership communicate a clear vision to all of its employees and advisors? Does leadership provide the resources, training, goals, working environment, motivation, accountability, and recognition necessary to accomplish the vision? If not, leadership should consider obtaining additional training to develop its skills prior to focusing upon growth.
Is your company effective in providing its goods and services? How close is it to its production capacity? Can the business grow without significant growth in resources? Does the business have reliable suppliers? Will growth impact future effectiveness? The answers to these questions will impact the ability to grow.
Does your business have adequate technology, facilities, equipment, employees, capital, and information to grow? Without them, growth may be restricted or even prohibited.
Does the business use metrics to benchmark itself against its competitors, others in the same industry, and other superior performing companies? Are metrics constantly analyzed and used to make operational changes to achieve constant improvement? If any are missing, the company needs to design and implement such systems.
Do you use various advisors (consultants, suppliers, customers, CPAs, lenders, attorneys, and employees) to develop strategies, products, services, processes, etc. to be used in the business? Does the business motivate these advisors to become vested in the success of the business? If not, the business should seek such advisors. Remember, many of them will be willing to serve as advisors at no-cost to the business.
Is there efficiency in the sales, production, and distribution process of your products and services? Costs tend to escalate in steps rather than proportionally. So, it is necessary to understand how a marginal increase in revenues will impact profitability. It may actually decrease profitability. So be careful!
Making sure your company has adequately addressed the items above will allow it to Accelerate Business Growth and maximize the results from the marketing plan.
- Would you like help expanding your business? Apply for the SBDC’s no-cost Growth Acceleration Services if you have Minimum of 3 years in business, 5 or more full-time employees and at least $1 million in annual sales ($500,000 in smaller counties).
- If you don’t meet the above qualifications you can sign up for no-cost consulting session or low-cost training. Contact the regional office at 813.905.5800 for more information.
By Jim Parrish, Growth Acceleration Services Director