By Frank Goley
As a company grows and matures, other factors in its successful management and growth become important. I will analyze a company’s Growth Stages and identify common issues, success factors and problems for each particular stage; identify Management Considerations and Challenges as the company grows and matures; and consider Future Planning Requirements. As a Company grows and matures, it is important the organization understands how to plan effectively for new challenges, issues, markets and problems.
Small Business Growth Stages
– Basic Existence Stage
– Main Issues and Characteristics
1. Obtaining Customers
2. Delivering the product and service
3. Viable Services
4. Expand from key customers to broader sales base
5. Have enough Cash on Hand to cover Cash Flow demands
6. Owner performs all Management functions
7. Often a lack of Planning & Systems
8. Business just trying to remain viable
9. Have yet to stabilize production or product quality
10. Trying to gain sufficient customer acceptance
11. Business has strong demand on the Owner’s time, cash and energy
– Survival Mode Stage
– Main Issues and Characteristics
1. Business demonstrates viability as business entity
2. Satisfies a base of customers
3. Focus shifts from existence to managing Cash Flow
4. Generate enough Cash Flow to break even, stay in business and finance growth
5. Focus on Market Niche exploitation
6. Simple organization and the owner begins to delegate to a manger. However, strong direction and control still rests with the Owner.
7. Planning concentrates on Cash Flow Forecasting
8. Systems development & implementation in early stages.
– Obtaining Success Stage
– Main Issues and Characteristics
1. Exploits its Market Niche
2. Obtain Strategic goals
3. Expansions is important but stability, control and profitability are key as well
4. Owner’s Options:
a. Expand and Grow the business
b. Maintain Stability as a means of support to the owner
c. Owner considers disengagement from the business
5. Market penetration
6. Competitive Edge
7. Functional Management & Owner Delegation
8. Management & Key Employee Competence
9. Generating sufficient Cash Flow
10. Planning for rough patches
11. Professional Staff: i.e. Controller, CFO, CEO
12. Production/ Service, Marketing, Strategic and Financial Systems established
13. Operational Budget Management
14. Growth Strategy Options
a. Consolidate Company, develop efficiencies and marshal resources
b. Use Retained Earnings and Cash Flow, leveraged with Finance, to grow the Company
c. Cash Flow Management & Profitability are key concerns to finance growth goals
d. Develop Key people and management
e. Strong Operational and Strategic Planning
f. Growth requires the owner’s deep involvement (verses disengagement)
– Rapid Growth Stage
– Main Issues and Characteristics
1. Committed to a Growth Strategy
2. Concerned with adequately financing the growth stage
3. Need good ownership delegation to improve managerial effectiveness.
4. Enterprise develops complexity. Performance Control Systems are important
5. Established Expense and Budget Controls to maintain strong Cash Flow.
6. Profitability Planning Systems are critically important
7. Effective Financial Planning, Forecasting, Modeling and Strategy
8. Very skilled, experienced and competent Management Structure
9. Company systems are tested, adapted and highly delegated, but there is strong Strategic Leadership from Top Management
10. Capacity to become a big business
11. Strong Potential for Business Sale Premium
12. Effective Delegation and reliance on talented Managers & Key Employees are keys to success
13. Founding Entrepreneur(s) can opt out of business and have a more advisory role
– Maturity Stage
– Main Interests and Characteristics
1. Consolidate and Control profits
2. Retain advantage of relative small size, nimbleness and flexibility
3. Quick market change response time
4. Still retains the entrepreneurial spirit
5. Growth causes inefficiencies so must ensure the Management Structure continues to grow and evolve. Strong Managerial Talent
6. Strong Budget, Operational and Strategic Planning capability and focus
7. MBO System (Management by Objectives)
8. Cost Systems
9. Extensive & well developed company systems and Management Structure
10. Strong Financial Resources
11. Convert Entrepreneurial spirit to a Formidable Market Force
12. Strong Market Niches and Competitive Edge
13. Exceptional Risk Management
14. Profitability boosted by successful Innovation
15. Strength in Market Branding and Recognition
16. Maintain Competitive Edge by anticipating Market changes and adapting better and faster than competitors
Management Considerations and Challenges
– Key Management Factors and Areas: The following are areas which change in importance as a company develops and grows, which often determines the success or failure of the enterprise:
1. Financial Strategy: Cash Flow and Finance
2. Personnel Planning: Amount, Depth, Structure and Quality of Key People and Management
3. System Integration: Product Development, Production Management, Cost Controls, Budgeting Systems, Marketing Systems, Quality Management, Customer Relations, Strategic Planning, Cash Flow Management, Profitability Analysis, Asset Management, and so forth.
4. Business Resources: Customer Service, Market Share, Market Growth, Market Penetration, Market Trends, Supplier Relations, Manufacturing Processes, Facility Efficiencies & Expansions, Distribution Systems, Sales Management, Innovation, Technology, Industry & Market Positioning and Business Reputation.
5. Company Goals and Objectives
6. Operational Planning and Abilities
7. Supply Chain Management
8. Owners Willingness and Ability to Delegate
9. Strategic Long-Term Outlook and Management
– The Role of Business Planning: A good Business Planning Structure will look at the mentioned factors (among others) and effectively plan, develop, install and implement systems and processes to manage and anticipate these challenges throughout the business enterprise. A company can grow, or for that matter, collapse, so quickly that it is very important to have Planning and Control Systems in place to manage all the numerous variables which a business encounters and considers. Therefore, as the business grows and changes, and as the markets and competitors change, the small business has established systems and resources in place to successfully handle and manage these changing forces and factors.
Future Planning
– Growth Considerations
1. Does the business have the quality and diversity of experience and talent needed to effectively manage a growing company?
2. Does the business have systems in place and in development to effectively handle the needs and demands of an expanding, diversifying enterprise?
3. Do the entrepreneur/ owner/ founder(s) have the foresight, inclination and ability to delegate decision making to management?
4. Does the business have the Cash and Finance structure, along with an understanding of the Risk Factors, to aggressively pursue rapid growth?
Application
In managing a growing, expanding and maturing Small Business, we presented a model by which to evaluate and plan for the current business situation and future concerns and challenges. By understanding the particular Growth Stage Characteristics and Issues, Management Considerations and Challenges, as well as, Future Growth Planning Considerations, a business can apply this planning format and model to anticipate problems and successfully sustain growth. This model should be an integral part of a Company’s Business Planning, Market Planning, Product Development Planning, Strategic Planning, Sales Planning and Financial Planning and Forecasting.
Conclusion
An imbalance of management factors and challenges can create serious problems for the entrepreneur and his/her growing enterprise. We illustrated how the problems faced and the respective skills necessary to effectively deal with challenges change and evolve as a company grows, expands, and seeks success. Therefore, it is vitally important for business owners to anticipate and strategically manage these factors as they become influential and important to the enterprise.
As I explained in this article on Small Business Growth Management Strategies, a company’s stage of development determines the managerial factors which are necessary and important. A Company’s Planning Structure is vitally crucial in determining which factors and issues must be faced and dealt with. Knowing its keys to success, development stage model and future planning needs, a company’s managers, entrepreneur, founders, executives, investors, advisors and consultants can make much more informed strategic decisions and plan for future challenges.
The Case for a Business Consultant
When an entrepreneur is starting and growing a company, it becomes vitally important from the outset to seek and obtain objective advice from experts. The Company Principals need expert advisors on their team to discuss decisions and obtain objective advice; challenge the founders’ venture needs appraisal; provide an honest appraisal of strengths and weaknesses; review decision making processes; identify survival tactics and needs; develop and implement a business plan, marketing plan, strategic plan, sales plan, and financial strategy; build market focus and niches; anticipate market trends; establish and sustain competitive edge; provide financial foresight and planning; focus on cost controls, budgeting procedures, cash flow management and maximizing profitability; along with obtaining the appropriate Financial Resources to augment self-investment and achieve growth goals and opportunities. In short, a Business Consultant, with an experienced track record, can fill this long requirement list, helping the entrepreneur and his or her advisory and management teams to successfully start, structure, plan, expand and profitably grow the enterprise.
