Feature
Grow your own way
Recognising and avoiding the risks associated with growth is vital if you are developing your SME into a prosperous business
O
ne thing is certain about your business – it’s a one-off. That means the challenges you face as it grows are unique. In addition, there
will be problems and opportunities that are governed by timing as much as the character of your company; what worked six months ago may no longer be the best approach. That’s why recognising and avoiding the
risks associated with growth is vital if your business is to prosper. You must make sure the moves you undertake today don’t create unnecessary problems in the future. Here are a few of the issues that can
affect growing businesses, and ideas on how they can be mitigated.
Plan ahead Markets are constantly changing and evolving, and that state of flux needs to be reflected in your business plan. Adapt your strategy as your company
grows. It may be that your focus changes from winning new clients to developing profitable relationships and optimising growth with your existing customer base. Growth doesn’t need to be achieved
by following the same business model. You can consider options such as outsourcing or franchising that might provide better opportunities. There are dangers in being gung-ho about new opportunities. You must always ask if the avenues that have opened up suit your strengths and vision of where you want your business to go. Remember, too, that every new development brings risks. Regularly
review the risks you face and develop contingency plans.
Focus on finance It’s probably trite to say, but every business must control cash flow. When you’re expanding it’s even more important. Making the best use of your finances is
key in business planning and when you’re considering new opportunities. You might need to forego promising opportunities if following them up would see your core business starved of funds. Carefully control your working capital
and you should be able to maximise your free cash flow. At the same time exercise tight control of overdue debts and efficient credit management. And you may want to think about raising financing against trade debts. Among the factors that become increasingly important as businesses grow are good stock control and effective supplier management. You need to minimise the chances of holding obsolete stock. To avoid this you can work with suppliers to reduce delivery cycles, or switch to those who offer just- in-time delivery. In any event, planning ahead will
help you anticipate your financing requirements and make sure any necessary funding is in place.
Stay market savvy Market conditions are always changing and you need to reflect this in your market research. If not, you could make decisions on out-of-date information, and risk failure. If your firm is successful, competitors
will adapt. Even if you have a leading- edge product or service, others can imitate and improve. And don’t assume that customers will stay loyal. If they find alternative sources who provide a better deal, they will take advantage of that. As any product or service ages, there’s
a squeeze on sales growth and profit margins. Knowing where your products or services are in their lifecycle will help you work out how to maximise profitability. Similarly, you must keep innovating to create new products and services that refresh your offer. There’s a wide range of information
available – from government departments, in newspapers and magazines, and online – that can give useful details on market conditions and trends. Even more valuable is your own
experience and knowledge. Use your understanding to create a picture of what customers want, how they behave and the most effective marketing solutions. Talk to key customers, suppliers and other business associates. Ask your staff to share their insights to customers and the marketplace. Use IT systems to share and analyse important information such as customers’ purchasing behaviour and preferences. And if you’re developing a new product or service, carry out research to test customer reaction and other critical factors before launch.
Use your understanding to create a picture of what customers want, how they behave and the most effective marketing solutions”
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www.glasgowchamberofcommerce.com
Prioritise structures to solve problems As your business grows, it’s important to leave behind any management approach that focuses on constant troubleshooting. There will always be short-term crises that appear urgent, but, in truth, they may not matter as much as other things you could be doing. For example, if you spend time soothing an irate customer you’ll protect one relationship. But, focus on recruiting a talented salesperson and you could be ensuring significant future sales. A good way to understand what you
need to prioritise is to identify what’s driving your growth. Take a disciplined approach to
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