A savvy business owner(s) will understand that a growth plan in a sizeable business cannot be done year on year it needs to be planned, sculpted and managed over a minimum of 3 years.
In this month's blog I am going to give you my opinions on how to effectively manage key aspects of growth, how to plan for the future and most importantly how to ensure it is sustainable and profitable.
Rule one - Decide the end goal
When I'm working with a large business I need to understand what the end goal is. In business terms what is the exit plan. Some build a business to sell or float but often it will be to pass onto a family member, some set up LLP's and sell off the assets, or build a client book and live happily ever after. It is crucial that when planning for growth, large business owners know what they want as this should be the focus of the 3 or 5 year plan.
This will help shape the growth plan taking into account the required senior structure, required turnover expectations and company legals. The reality is if you sell or float a business and do not build a robust senior structure, you will never capitalise on any growth made as the new buyer or shareholders will need you to run it.
Succession planning and shaping a senior management team can make or break growth in a large business.
Rule two - Many hands make light work
As you will well know business is all about people. Get the right people, focus them and give them a clear direction and you will make a fortune. Every good member of staff will be working towards contributing more each year and for their own financial stability will want your business to do well. Whenever I am writing a business or growth strategy I use the expertise around me, if you have a senior team then they have accountability to be the brains of the business and add their expertise. Using the managers or staff who have experience and integrity will add education, ambition and direction into any growth strategy.
Rule three - Be a leader not a learner
You have your end goal; you have your strategy now you need to ensure you manage it through. To be an effective boss you need to be one step ahead or at least have your staff think you are. Personally the only way I can really manage a business is by having a grip of the real-time numbers. The amount of large business owners I meet who don't understand their numbers is frightening and they sit in meetings and wait for their businesses performance to be explained to them. Mapping out your figures not only gives you awareness but confidence in how you are doing.
I can effectively manage a business from £1 - £17m with one sheet of paper as long as its holds the key information, is accurate and is done on a monthly basis.
I would recommend you sit down and map out the following sales management information for the last 3 years:
- Unit sales per month
- Turnover per month
- Gross profit per month
Once you have done this, map out the following financial information:
- Cost Base per quarter (This includes Staff)
- Net profit per quarter
By managing your current sales performance against the set budget (which includes the growth targets)highlights any underperformance ensuring growth occurs. The financial tracking needs to be done quarterly to ensure any spending is inline with the budget and is not spiralling out of control. Doing this will have a direct impact on your profits.
Most businesses plan for growth on a set percentage scale such as 5% or 10% and always base growth on Turnover, I don't. You are not reaching your full potential if each year you only grow by the percentage you have for the last 3 years. If you increase your headcount your bottom line should show this. I look for each member of sales staff to contribute to my net profit otherwise what is the point of having them? If my sales team increase so will my take home.
Rule four - Working smarter, not harder
I am the queen of conversion. I love walking into a business and generating growth without them spending any money on increasing staff or lead volumes. Conversion to me is the absolute key to growth as if you do not manage it effectively you will never be as profitable as you should be. To truly understand your conversions you have to understand the sales process in your business. I have mapped out a very simple sales structure below:
Lead - Appointment
Appointment - Quote
Quote - Order
Order - Invoice
Invoice - Revenue Received
Mapping out and managing sales conversions has a massive impact on revenue. Understanding your conversions makes you understand where you are losing money. If you plan for growth and invest in your marketing to generate more lead but your sales staff can't convert you are wasting time and money.
Rule five - Keep it real and your feet on the ground
The point in which a large business grows larger is risky and I know this from my own personal experience. During this time you can out grow your premises, I.T infrastructure, staffing structure and most often the management structure. All of this results in an increased cost base and unsettled staff.
Rule six - Leave no place to hide
Acknowledgement of growth is an important aspect to managing it. You need to set up regular, accurate reporting that measures the current business and staffs performance. I always measure against two indicators:
- Actual performance year to date against current budget
- Actual performance year to date, year on year
What is crucial is that you make every manager take accountability for their own area. Do not just take a sweeping overall look at your business as I guarantee growth in one area will be absorbed in another unless you manage your mangers.