THE MAGAZINE FOR PROFESSIONALS

Managing Growth:

Sally J. Clasen

art_department_image1You’re bursting at the seams. The phones are ringing off the wall. You’re hustling to keep up with orders. Isn’t business growth grand? Yes, if you’ve got a handle on your momentum. But if your sales are outpacing your capacity and infrastructure, you could be headed for an explosive crash instead of explosive growth. All successful businesses, regardless of industry, adopt similar strategies and behaviors to sustain their pace as they expand. Whether you want to jump to the next level or build an empire, here are some tips to manage a growth spurt.

1 BE THE MASTER OF YOUR DOMAIN.

If you are in a growth phase, especially small-business owners, you must first stop thinking like an employee who has a job and start to assume the role of boss, suggests M. Lynne Jacob, a performance coach and business advisor from Montreal whose clients include small- to midsize businesses in the construction industry. “It’s the hardest thing for small-business owners who are experiencing growth to get past the self-employment mind-set. I tell my clients they are no longer an employee or a colleague, but a business owner.”

As a business grows, it’s inevitable that more employees are hired, which results in a whole set of complexities and issues that will tax the owner’s time—and productivity. “It’s impossible to still be one of the employees while simultaneously managing them,” Jacob adds.

Tom Ryan, director of marketing for Corporate Business Solutions, an analytical and management consulting firm based in Buffalo Grove, IL that works with small- and medium-size businesses, agrees that business owners need to perceive themselves as those who are driving the growing operation, and then act accordingly.

“In a fast-growing company it is imperative that small-business owners transition from a mom-and-pop mentality to a regular business environment. You have to become a master strategist and a strategic visionary for the enterprise. You have to see yourself differently in a world of competition.”

2 LEAD, DON’T FOLLOW, THE CROWD.

It is one thing to adopt the title of ‘Boss’ but it’s another thing to be a great leader. If you are at the business helm, even if it’s a staff of three, and don’t have a clue as to what the company’s direction is, you can’t expect the two other employees to understand how to help you reach the final destination.

Yet, if a business owner is leading effectively with a clear strategic vision and can answer, “What am I selling, does it provide value, and who is my target audience?” he or she can anticipate, rather than react to, hurdles and scenarios that thwart continued growth. What this does is put the business owner in the driver’s seat, according to Jacob. “Everything looks like money if you don’t have a vision in place,” she says. Plus, it allows those in charge to leverage their time better so they can generate more business. “People don’t grow as entrepreneurs if they aren’t ahead of the game,” she adds.

Of course, that sometimes means firing employees who aren’t onboard with your strategic vision. On the flip side, business owners experiencing growth need to hire and keep skilled and valuable employees who are contributing to the company’s growth—and then get out of their way and let them do their jobs.

Ryan also recommends creating an incentive-based excess productivity program to reward employees who have been instrumental in the business expansion, which is particularly effective in industries that use crews, such as in construction and painting. Rather than waiting for a bonus at the end of the year, employees earn bonuses at the conclusion of a project when it comes in under bid and on time. “This creates a situation where employees are thinking in terms of productivity rather than an hourly wage,” he says.

3 BE MEASURED AND SYSTEMATIC.

A growing company must establish internal systems and measure and evaluate performance. That includes having a step-by-step process from the time the phone rings, HR policies, and quality and inventory controls, advises Jacob. A systematic approach should also include a detailed organizational chart of who’s in charge of what and then consistent execution of that management model, which is especially important if a company grows from two to 12 employees in short order. The benefit of having systems in place, says Jacob, is that everyone is reading from the same page, so clear communication happens—which ultimately results in increased profits.

To stay on a growth trajectory, Ryan suggests that small businesses emulate major companies, who all have tried-and-true systems in place to stay on top of financial and operational productivity. “Many of these companies, like Walmart for example, created such systems when they were small,” he says.

4 MANAGE THE MONEY FLOW.

Speaking of tracking, what’s your cash situation? As business grows, cash needs increase, so it’s critical to manage cash flow during a positive cycle, adds Ryan. “You can have growth without experiencing profits,” he says. “Too many business owners look at their revenue and top line and fall into a trap thinking, ‘Things are going great” but they are robbing Peter to pay Paul.”

He suggests that business owners create an integrated cash-management reporting system (there’s the S-word again) that predicts the demands on cash. “It’s common for businesses to end up with surplus inventory they have to pay for and then can’t make payroll because they don’t have the ability to know what their cash position will be 12 weeks from now,” Ryan explains. And that includes all business units in your organization.

“Every department needs a system to track costs in real time. Cash is like driving a car, which has a speedometer, odometer, and gas gauges. You might think it’s great that you’re going fast but if you don’t know how fast you are going, you’ll end up in trouble.”

5 THIN THE (BAD) CUSTOMER HERD.

While it might seem counterintuitive to get rid of paying customers as your business is on the upswing, now is the time to take stock of who is a drag on the system—and profits, suggests Jacob. “Not all customers are good customers,” she says. “Every business has an A, B and C customer—those who are great to work with and have money, those who are good to work with but maybe have less cash, and then those customers who you took on because you needed them, but are difficult and create a much lower profit margin.”

One way to thin the herd is to raise prices. Yes. Raise your prices. “If customers have a problem with this, that’s OK,” she says. “Increase your prices with the next five jobs, then increase them again and continue to do this until you have pushback from two customers. If you do lose a few customers, that’s fine because you are making that much more profit from those who have accepted the price increase. Plus, it gives you some breathing space.”

At the end of the day, according to Ryan, the idea is to grow in a controlled manner and create a stronger business during the ups and downs so you can build a solid foundation, whatever comes down the road.

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