So, you’ve founded a company, survived the first few years and now employ around 20 people. The good news: you’ve come further than the average entrepreneur, who, statistics show, starts several businesses before eventually succeeding, if they succeed at all. The challenge now isn’t how to maintain a lucrative growth trajectory, it’s about how you manage change – an aspect of starting and growing a business that few entrepreneurs consider.
In the early years, surviving from one month to the next is enough to keep any businessperson occupied. Factor in daunting tasks such as attracting and retaining new clients, and it’s easy to see why concerns over managing that change tend to fall away. But this is a major oversight that comes back to bite many CEOs. Every business is dynamic and undergoes constant change. Mostly these shifts are subtle – picking up a new client or adding a new product or service – but they can be dramatic, such as a capital injection that turns a small business into a large business that can suddenly compete globally.
Most leaders find managing that change difficult because they either aren’t qualified to run a large business, or they’re so immersed in the business detail that they can’t focus on the wider strategic picture.
Managing change is important and can dictate the future of a business. Here I will focus on six high-level operational considerations that every entrepreneur should address as their business grows and needs to adapt. They could make the difference between success and failure.
1. Rely on grounded forecasting
Every entrepreneur is an optimist at heart. If not, they would never embark on the, often tumultuous, journey of starting a business. Many make exaggerated assumptions about their revenue potential: ‘If I can just capture 1% of my industry’s market share, I’ll be in great shape,’ is a harrowing refrain heard too often by accountants and business advisers. Yet achieving even that seemingly modest goal can be difficult. Optimism is wonderful, but it must be tempered by realism. This means:
- constantly re-evaluating business risks and opportunities
- assessing which profit centres you can cultivate
- analysing your market for vulnerabilities you can exploit
- taking action to protect against areas of concern
- being ready to evolve your business model, simultaneously monitoring metrics such as cash flow.
2. Analyse to remain competitive
Even if your business reaches the pinnacle in its industry, you can’t guarantee it will stay there. To continue to compete in your industry you must monitor your competitors closely while continually improving your systems and processes, and your products and services. Fix processes before they fail and don’t wait until a product or service becomes outdated before readying a new improved version.
3. Keep a close eye on your books
The idea of maintaining strong cash flow is one that confuses many entrepreneurs. An outstanding invoice is worthless until it’s paid, and just a month or two with no cash flow can break a business.
Managing your cash flow needs thorough planning, this includes forecasting future revenue and agreeing alternative funding sources to cover periods when cash flow dries up. Keeping costs under control, while still pursuing growth opportunities, is a delicate balance, and one that can elude even the best-intentioned entrepreneur. If you sell products, keep tabs on stock levels and be prepared to sell at a discount when they run high. Also, find ways to shorten receivable timelines. Always be aware of customers or suppliers in financial distress. Signs include drawn out payment terms and missed payments.
Crucially, make sure your accountant is equipped with the knowledge and expertise to handle your growing business, you will need to rely on their expertise.
4. Reassess talent
The people who help you start your business aren’t necessarily the right people to take it to the next level. This can include you the business owner. Successful businesses shuffle their staff regularly, especially in periods of change. It can even make sense for a business founder to hand the reins to a more qualified CEO to manage day-to-day operations when change dictates the need for a more advanced skill set. Whatever the circumstances facing your organisation, be prepared to continually re-evaluate your team and to ensure you always have the right talent, in the right place, doing the right things.
5. Implement new systems
Systems that work today aren’t necessarily effective tomorrow. Everything from your critical software to production equipment to employee policies and induction programmes should be under constant scrutiny. If there are ways to improve these systems, implement them. If some are outdated and need to be discarded altogether, do so. Many SMEs tied to old ways of doing business, see their competitors leave them behind. Don’t put yourself in this position.
6. Embrace change
Identifying and embracing change when it’s needed is key to business success. This takes strategic insight, careful planning and pinpoint execution. When you get it right, implementing effective and strategic changes can help your business survive almost any challenge.
If you need support with change management please get in touch on 0161 476 8276 or email email@example.com.
Guest blog by Hartley Cohen, a partner at KRP, Toronto, Canada.
(First published Russell Bedford: Business World August 2019)