What happens if your business growth objectives come to fruition?
Will your Business Operations (or delivery engine) be able to deliver the increased demand?
Many business owners are actually scared of aggressive growth, because of their concerns with their ability to deliver the increased product or service demand. Others are unclear as to how to prepare for this growth. And, in some cases this reticence results in a reluctance to push for growth.
So, how do we give you, the business owner, the confidence to aggressively grow your business?
The answer lies in focusing on scaling your business, rather than just growing your business.
What does this mean?
If a business owner simply continues trying to increase their revenue by adding more resources with a corresponding increase in costs, their growth is likely to stagnate. The business will get to a point where there is a realisation that the effort to grow simply is not worth the financial gain. And, if not done right, the risk is that bringing in new customers without the right delivery engine will end up with dissatisfied customers.
What a business owner needs instead is a strategy for scaling that focuses on increasing revenue while also increasing efficiency. In the scaling scenario, it will be worth the effort to reach more customers since the business will be expending a comparatively low amount and therefore making increasingly larger amounts of profit. The business owner will be increasing the businesses value by increasing the efficiency with which they can bring in new revenue. And, the business owner will also have confidence in fulfilling his / her customer needs by having a delivery engine capable of delivering the increased demand. .
As an example, a food manufacturing business has grown its revenue consistently over three years. With plans to double this revenue growth in the next 12 months, the business owner has recognised the need to proactively look at how to achieve efficiencies to deliver the product for the potential increased demand.
With a plan to double his sales, the business owner has asked himself:
How can I reduce the cost of raw materials? The business has, in fact, identified an alternate supplier which provides its raw materials at 50% of the cost of the current supplier.
How can I reduce the cost of packaging? The business is in discussions with alternate packaging suppliers which have the potential to reduce their current cost by at least 60%.
How can I reduce the cost of, and increase the speed of manufacturing? The business has investigated the use of machinery to both speed up and reduce the people costs of manufacturing.
These efficiency strategies are looking at what it will take to deliver their product for the increased demand. These strategies and the related actions are providing the business owner the confidence to continue with its aggressive marketing and sales campaign.
So, what can you as a business owner do to scale your business?
The following approach is aimed at helping you, the business owner, to understand how to scale your business operations:
Step 1: Start with the end in mind
The starting point is to define your business’ growth objective, or a related growth milestone.
For example, your current business operations (your delivery engine) can comfortably deliver 20,000 units per month, or it can deliver services to 4 new customers per year.
But, is your business operations able to scale their delivery to your growth objective - 40,000 units per month, or 10 new customers per year?
Alternatively, as a startup business, your initial milestone is to deliver product or services to 3 customers. Is your business operations able to meet the delivery to the milestone?
Step 2: Understand the readiness of your business operations to support the growth objective, or milestone
Your business operations comprises a number of core capabilities – materials supply, delivery / manufacturing processes and supporting systems.
For each of these capabilities, a business owner needs to ask the following questions:
Can the capability deliver your growth aspirations in its current form?
If not, what needs to change for that capability to be able to deliver to your growth aspirations?
Material – the capability to supply the materials to meet demand
Do your current suppliers have the capability to supply the required materials?
Do you need alternate or additional suppliers to supplement supply?
Does your current approach to sourcing people have the capability to supply the right people when you need them?
Do you need alternate or additional approaches to supplement the supply?
Delivery / Manufacturing – the capability to Deliver / Manufacture the product or service
Can your current manufacturing capability produce the increase product product demand efficiently, at the right price and at the right quality?
What needs to be done to ensure you are able to deliver consistent and quality services?
Are your core delivery / manufacturing processes delivered through a majority of manual work? Are there opportunities for automation by systems?
Do you have the right People – skills and experience?
Do you have the right numbers of People – do you need to hire additional staff, do you need to add an additional shift?
Step 3: In parallel to your strategies for growth, develop your capability
If you wait until your business growth objective, or milestone, is a reality it will be too late.
As a business owner, having identified what needs to happen to be ready for the growth, you have time to prepare yourself, your business and your investment priorities.
So, as well as a plan to grow your revenue, the business needs to have a plan which actions getting your business operations ready.
For businesses, the path to success is not found in simply growing but in scaling your business. Scaling a business requires a whole new level of skills and systems that many business owners cannot fully anticipate.
It requires the business owner to work ON their business on a regular basis, not just IN their business working on day to day issues.
Transcend is a team of experienced business advisors and mentors supporting business owners to improve their performance and achieve their business aspirations. For more information refer to www.transcendhcs.com.au.