August 2007

Six Degrees - What Does Growth Mean to You?

Dear David

After last month’s discussion about company rescue, a more optimistic topic! This month we look at company growth and some of the considerations you might like to take into account before making the big decision to go for growth.

Please feel free to forward this issue to anyone else you think will enjoy reading it and find it useful.  If you've been forwarded this issue, you can subscribe to receive your own free monthly copy by clicking here.

With best wishes,

The partners at CMC

Why aren’t You Getting What You Wanted from Your Company?

“I’ll start my own business and be rich in a few years”

“As my own boss, I’ll quickly secure my own financial future”

“My business isn’t growing fast enough to keep pace with the growth in overheads”

“I thought working for myself would be easier than this and would make me rich”

‘’The tax burden gets worse and worse – I must grow to make any return’’

Sound familiar in any way? What were your expectations of running your own business when you set out? We often hear business owner-managers talking in a way which reveals that they expected that their company would automatically ‘grow’ over the years.

What do You Mean by ‘Growth’?

The answer is that it comes back again to your personal objectives.

What exactly do you mean when you talk about your company ‘growing’? Do you simply want to keep pace with inflation and produce a stable income for yourself and your family? Do you want to prepare the company for succession, so that you can withdraw from the business and retire early? Or do you want to grow the business to be able to sell it at some future time and generate your pension?

It is really important to decide early on whether you want to consolidate your business’s position or find ways to grow. There are very real consequences to making the decision to go for growth, and you must understand the implications - it’s not a decision to be made lightly. Once you start the process of growing your company you will:

  • Be committing yourself to at least a few years of total dedication to the business

  • Need to rely heavily on your own management abilities, and those of your team

  • Confront your own strengths and weaknesses

  • Have to learn to delegate – the more advanced functions of a growing organisation cannot be carried out effectively by one person, nor would this be healthy for your business

  • Need to plan carefully if the growth strategy is to succeed

  • Need to accept help and relinquish the kind of control you have had over your own business – no small consideration for the average entrepreneur!

Why do You Want to go for Growth?

If you do decide you want your company to grow, then it’s equally important to decide your ultimate objectives. You might want your company to ‘grow’ to a point where it is worth something in terms of its asset value so you can sell it. Do you want to improve the company’s financial position so you can fund other ventures? Or you might want to install the stable processes and healthy culture of a ‘proper’ company, so that you business’s sustainability over time is assured.

Once you have decided your ultimate objectives, you can move on to the next stage - building a strategy for growth. The right strategy begins with an assessment of the business’s current strengths and weaknesses, and ability to deliver stability and long-term profits. The areas we would recommend you examine are:

  • Your Strategy. How realistic is it? Does it identify how you can make the most of the market position you've established and provide a clear road map for where to take your business next? Is the business model workable in the future or is it threatened? Are you playing to your strengths and working round your weaknesses?

  • Your Company’s Finances. How healthy are they, and how realistic are your numbers for the future? Are your margins sustainable? What level of risk are you taking?

  • Your Sales & Marketing. Are your marketing plans well-grounded and your sales process adequate to deliver the numbers you project? Is your Sales and Marketing developing against your competitors or are you being left behind?

  • Your People. Do you have the right people in place? Do you have enough of them, with the right skills and the right training and development support? Is your business developing the right culture?

  • Your Processes. Are they robust enough to support the increase in activity that growth will mean? Is your business scaleable and still efficient as it grows?

In short, the ‘growth’ phase of a company’s lifecycle is a very different phase from the ‘start-up’ phase you have been used to managing. It’s not just about survival and managing the day to day cash flow.  It’s not just a natural progression, and doesn’t happen all by itself. It demands planning, different skills, and the right people and processes to be put in place.

At CMC we will provide an objective outside view to help you decide if and when to kick off a new phase of growth for your business. When we have gained a thorough understanding of your aims, we will work with you to take you through the decisions you need to make, and create a thorough and effective action plan to achieve the results you want. We will 'hand hold' you through each decision, helping you to avoid the pitfalls and ensuring profitable growth.

Going for Growth

A company specialising in communications, web design and branding in the electronics sector, was having a very rough time four years ago at the time they called in CMC. Despite a blue chip client list, and a strong, skilled Board, they were struggling to sell two or three projects per month and maintain a turnover of £1m. The company was effectively valueless and trading on the edge of insolvency.

After working with us for around four years they were turning over £6.5m and making double figure profits. What was our role?

We worked with the company to:

  • Get the timing right to kick off the company’s push for growth

  • Re-educate the Directors, so that they operated as directors, rather than managers

  • Develop existing accounts, and build a team of strong Account Directors, rather than endlessly working to generate new sales from scratch

  • Involve key Account Directors in regular Board meetings and discussions about the sales pipeline, the business numbers and monthly targets

  • Establish a strong second tier of senior company managers, the majority promoted from within

  • ·Recruit where necessary to ‘buy in‘ missing skills

  • Put in a competency framework and a strong performance and development management process

  • Enhance business processes to keep pace with the company’s growth

  • Clear blockages to growth as they arose in the company

The company sold recently for £8.6m, its value having risen from zero to £8.6m in four years. Their decision to ‘go for growth’ generated a very acceptable return on investment!

Food for Thought

"If you always do what you've always done, then you'll always get what you've always got." (used by various speakers, notably Zig Ziglar)

"One hundred percent of the shots you don't take don't go in." (Wayne Gretzky, former National Hockey League superstar)

“In any moment of decision the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing." (attributed to Theodore Roosevelt)