The latest economic growth figures issued last week confirmed that the UK economy has returned to its pre-recession peak. And is now producing more than it has ever produced before. So shouldn’t business owners feel more confident (and prosperous) than ever before?
Growth is often the number one businesses aim, yet ironically enough, when growth arrives the sudden surge often brings with it not only great opportunities but also significant threats. Threat which can cause a company to falter or even fail. This is because small business owners and managers lack the experience needed to meet the challenges of growth.
Below are some of the inhibitors to successful growth (and what you can do to avoid them).
Lack of capital
Lack of capital is often the most critical challenge that successful and growing SMEs encounter. Without careful and regular cash flow management, business growth is often is threatened by a lack of capital. The profit (and cash) generated is often insufficient to fund the extra working capital required for the ongoing growth.
The solution is to ensure you have a clear plan with financial and cash forecasts, which predict what your cash needs will be and when those needs will arise.
Lack of a plan
This is often a fundamental problem for many SMEs. If you have a plan that clearly sets out your objectives you are much more likely to achieve them. And having a plan will enable you to clearly think through and implement the steps necessary to achieve that plan.
Many SME owners spend too much time dealing with “urgent issues”. This means they find it that it is difficult to recognise the steps they need to take to achieve their long-term objectives. A plan disciplines you to look beyond the day to day issues and can alert you to inconsistencies that need to be managed. For example a lack of capital or other resources necessary to fund the growth projected. If you recognise the problems you will be in a position to better manage the limiting factors.
Lack of information
Lack of information about what is and what is not working in the business is an issue. We often find that business owners do not measure the results from all the key areas of their businesses. So when something specific causes a positive or negative change to their results they do not know what has caused it.
Implementing a process for measuring and tracking the key performance indicators (KPIs) for your business on a weekly or (at least) monthly basis is vital and enables you to react to challenges and opportunities alike. Remember you cannot manage what you do not measure. Regular measurement of the KPIs quickly alerts you to a change from the norm. Once awareness is established, solutions are easier to find.
Lack of business management skills
Many SME owners successfully grow their business to a level through their skills and expertise in their chosen area of operation. This is often coupled with great customer service. But as their business grows further their lack of business management skills and experience is a problem that ultimately limits growth.
In most SMEs the size of the senior management team is necessarily limited and the areas of weakness often include finance, marketing, sales and the performance management. These key areas are often outside the comfort zones of many business owners, which makes it extra hard to improve them.
The solution is to first determine what those areas of weakness are and then to develop a plan for dealing with those challenges. Although specific areas of responsibility can be assigned to an existing or new manager it is vital for business owners to slowly stretch their own comfort zones by building knowledge in all the key areas of their business. This means they can properly manage the whole business. To do this often requires a bit of help from someone experienced in business. But often who is not part of your business. Someone who can help develop the necessary skills and move you outside your comfort zones. It can be a lonely world running a business!
Poor procedures are a constant challenge for growing SMEs trying to manage with limited resources. Many business owners don’t realise that the systems and procedures for managing the business need to be well designed to reduce the incidence of errors. And fit for purpose as the business becomes bigger.
The time wasted correcting errors caused by inadequate procedures is often significant and impacts on management time.
Investing a little time and effort up front to develop the right procedures will pay enormous dividends in time and cost savings as a business continues its growth path.
Lack of focus
Lack of focus can be a real challenge for a small business owner as there are always changes in priorities, issues that need attention and fires that need extinguishing. Often opportunities present themselves and it is difficult to say “no” to a short-term opportunity. But this may well distract you from your long-term goals.
The solution is to be clear about your long-term objectives and which opportunities will facilitate their achievement. As long as you are doing this, then you can evaluate other opportunities that come up by how much they will draw resources away from your ability to achieve your long-term goals.
Poor time management
Failure to plan for issues that absorb your time is one of the greatest failings of many SME owners. If you regularly plan and review how you use your time it will ensure you always focus on the most important things. Time is your business asset so it is important to do the right things, for the right reasons, at the right time. And also, time management is about personal leadership. It enables you to know how to lead yourself and this enables you to then lead others.