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Beyond the balance sheet

Strategic direction & growth - what business owners need to focus on

Ercan Demiralay 10/3/2017 5 minute read

Ercan Demiralay explains the shift in mindset required by founders when progressing a business into growth.

Sales, moving into profitability and brand traction mean you’ve successfully moved beyond the start-up phase and proven the credibility of your business plan. Now it’s time to prepare for expansion and the trials that come with growing a business by developing a strategic direction.

As an owner manager, shifting from a start-up operation to a growing business requires a significant change in mindset. That means moving away from an emphasis on product/service and market fit. You may be taking on employees or moving into new premises, but the most important aspect in all this will be you and what you focus on!

We’ve advised entrepreneurial businesses for over 75 years and have seen plenty of what does and doesn’t work. Often when entering the growth phase ('good times' and 'payback'), we find founders become engulfed in numerous tasks, leading to stress and lack of clarity in decision making. So we’ve written this blog to provide you with the three strategies for achieving and sustaining growth. 

Get our free guide on sustainable growth strategy!

The stages modelThe Stages Model diagram (a concept originally developed by Shirlaws)

1. Develop the long term strategy

Often in the early days an entrepreneur’s approach will be dominated by turning their idea into a commercially viable business. That means establishing a new or different product/service that dovetails to a particular market. It’s a case of innovating, testing and developing to better address the needs and wants of customers.

In many ways however, this isn’t really a strategy for your business! What entrepreneurs are actually doing here is establishing their business. Once this is achieved then it’s time to move into the next phase of the business lifecycle by developing a plan that lays out your business growth strategy.

Growth entails becoming a lot bigger while protecting your intellectual property from competitors. Sounds simple however, it’s anything but! Strategic direction usually requires considerable thought, careful planning and time. It needs to come from you as the owner manager and founder or, from you and a small number of people such as an executive team.

 

Few people should be involved in developing a strategy as it’s not something that can be done well democratically via appeasement. In undertaking this task you should look to answer the following questions and so revisit your business plan (if you have one, if you don’t then it’s time to write one):

  • What is the vision and mission of your business? Or, why are you in business?
  • What level of growth and sales will you look to achieve in the next 5+ years?
  • What will you implement and do to achieve that growth?

The last question is vital because the answer will involve addressing resource requirements which takes us nicely on to the second essential area of focus…

2. Hire the right people and looking after your team

Taking on and managing the right people is critical to business success. Get it right and you’ll see how a team is absolutely intrinsic to growth. That's because as your organisation develops you will become increasingly reliant on your employees to:

  • Manage customer relationships and drive sales
  • Ensure the smooth running of the core functions of the business
  • Have ideas that develop the internal workings of your organisation as well as your offerings

Your people will bring the strategy to life. The emphasis therefore is to get the right people on board to implement the necessary things to achieve your vision. Crucial in all of this is to retain your best staff and their continued development is at the heart of that process.

When hiring look for the right attitude, fit and aptitude for the tasks required. If you have someone with the right mindset and personality traits for your organisation then don’t forget that you can potentially train and develop skills for the role. This might be why some organisations hire predominantly around cultural fit.

Ultimately you’re looking to develop an executive team in time that can perform the vital tasks and run most things without your input. The business should not be entirely dependent on you and should be able to operate normally in your absence. For example, if you have plans to eventually sell, a potential buyer will usually query how well things will operate when you depart.

Unfortunately the likelihood is in the early days you’ll get the hiring side of things wrong and learn valuable lessons. This highlights why it’s so important to develop the strategic direction to help you envisage what kind of person will work within the culture of your business and what you’re trying to achieve.

Remember to revisit regularly with the team, your vision and how the business is progressing towards it. Inspiring and keeping people motivated is essential and this means frequent communication with your workforce. You’ll need to be empathetic to the issues they face, while showing them how the end goal remains achievable no matter what the challenges or level of current progress towards it.

3. Monitor margins and your cash position

Always check your margins regularly and carefully so that you can either reduce costs or alter prices when the time calls for it. Forward plan by considering how changes in the political climate and economic developments might impact on your profitability. You should review your cash position (via the working capital formula) regularly to ensure the business doesn’t run out of money.

 

 

Careful financial management means understanding cashflow today and what it will look like in 6 months time. Ultimately working capital and profitability are key financial dynamics that must be accessible frequently via your management accounts. Unless it’s your core area of competency (and even if it is you probably shouldn’t do it), avoid the time and effort of putting these reports together.

The reason being you’ll be far too busy developing a long term strategy, communicating it, recruiting the right employees and keeping them motivated and happy. Leave the production of financial reporting to either a back office finance team or, more likely, outsource it to a good accounting firm.

In the early days of growth, lots of things will happen and crises may occur that require your immediate attention. This will take your focus away from these three competencies. Be sure to return to them as soon as possible and build the business in such a manner that eventually that is all you do. In our experience, owner managers who achieve that level of focus are usually getting it very right.

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The content of this post is up to date and relevant as at 10/03/2017.

Please note that the names and characters used in the examples mentioned above are hypothetical. Please also be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.

 

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