Management: Getting ready for growth

Graham Robson

Graham Robson from Business Doctors looks into the challenges business face in terms of growth

Growth is a real challenge for every small business. The traditional retail model is to first grow revenue through acquiring more customers, whilst ensuring you grow resources at the same rate so that you can continue to serve those customers effectively. Businesses fail when resources do not keep pace because this usually results in delivering a poor customer experience.

This method of growth creates huge hurdles that business must overcome to get to the next level. These constraints are structural to the business and are typically cash for working capital growth, capital costs associated with moving to a larger showroom, hiring and training additional employees and negotiating broader supplier agreements - all of which create substantial business risk for a small company.

These fixed overheads costs typically result in short term pressure on profit margins. Getting any of this wrong will likely result in the demise of the business as we have seen happen frequently in the past. Therefore, retailers shy away from growth that would put a strain on their current resource capabilities and prefer to stay in the moment.  

Rather than think about growth, I suggest SME owners concentrate on scale. Growth is about adding resources at the same rate as revenue growth, whereas scale is about having the ability to grow revenue exponentially with only incremental growth in resources. Creating scale in your business allows sustained growth to occur with minimum risk.

To find scalability, you need to focus on the parts of your business that can be replicated quickly and cost effectively. One suggestion is, if you haven’t done it already, create an online presence for the showroom that displays a far wider range of supplier products. Include an automated ordering and booking system. If you’re already marketing yourself online, improve your website and invest in targeted marketing to drive traffic. Look at SEO, Google AdWords, content marketing, social media marketing and PR.

Other simple changes that can punch above their weight include reducing cash needed for working capital by delaying payments to suppliers by negotiating better deals and achieving quicker payments from customers through automation.Set standards for the way you operate and write them down precisely. This will make it easier to train new staff.

Create alliances with outsourced installers who can work to the standards you have set. This can rapidly widen your geographic scope of customer supply. Directly connect with suppliers on an order pull through model which is scalable and automate processes such as selling, completing orders and invoicing.

Growth is a challenge for independent retailers due to the physical constraints that they operate under, however becoming scalable provides a low risk solution that can lead to exponential revenue growth with incremental increases in resources.

If you would like to find out more visit https://www.businessdoctors.co.uk

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