“The toughest thing about success is that you’ve got to keep on being a success.” — Irving Berlin
SME Chat with Phillip Chichoni
The moment a business stops growing, it starts to decline. With continuous decline comes death. If your business is not growing, then there is a very high risk of it closing down. You therefore need to know if your business is growing and how to keep the growth momentum.
Growth is an increase in the value of a company. The following factors contribute to the value of a business: customer franchise capable managers operational efficiencies competitive edge There are a number of ways in which a business can grow. Here are some of them:
Get existing customers to buy more of the same product. Get new customers to buy existing products. Extend your products and services range. Develop multiple products and services that you can cross-sell to the same customers. Sell more higher margin products. Franchise your business, i.e. get others to make and sell your products in return for a fee.
One of the most important assets of a company is its customer base.
Without customers to buy your goods and services you are not in business. Making something that pleases you and not necessarily anyone else is really a hobby. A business usually starts with a few customers, who gradually increase with time.
However, as an asset, a customer base is hardly fixed as an aggressive or innovative competitor can rapidly sway customers away from your company’s products.
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Failure to acquire new customers will not leave your customer base at the same level; it will actually erode it, as competition is always lying in wait to snatch your existing customers. You really need to keep on acquiring new customers in order to maintain the value of your business. Growing the number of your customers will require a great deal of effort.
When you started in business you had little or no experience of running your own real company. You learned and gained knowledge and experience with time, improving your methods and processes until you became effective and efficient in managing the business. Such experience adds value to a company.
Efficient systems and processes and a market oriented culture contribute in giving company an advantage over its competitors. Continuous improvement is required in all these areas if a company wants to grow. Strategic planning will help point out the areas that need improvement and map out how this will be achieved. Look at the financial statement of any listed company and you will be met with statements such as these:
Revenue up 22% to US$255,5m Operating profit up 31% to US$25,9m Profit before tax up 51% to US$24,2m Cash generated from operating activities up 158% to US$26,7m Basic earnings per share up 116% to 2,61 cents Interim dividend up 50% to 0,6 cents per share.
Business growth is basically measured in financial terms. Other measures include the number of customers, volumes and market share.
Financial measures are good performance measures because they are standardised and objective. One can easily compare the performance of one business against another by analysing the financial results.
In setting your growth targets, financial benchmarks are good measures because they enable comparison with previous periods.
Financial goals are therefore an important part of the strategic planning process. Depending on your business values and vision, other measures may also be important, such as quality, customer satisfaction, efficiency and service turnaround. As you get used to the strategic planning process, you will find some measures more relevant than others and so you will adopt those that are useful for your purpose.
To help you in planning for growth, you can download my handbook, Three Steps to Developing a Strategic Plan to Grow Your Business. You will find it at my website http://smebusinesslink.com, on the Business Resources page.
Phillip Chichoni is a business development consultant who works with SMEs and entrepreneurs. You may contact him by email: [email protected] Visit: http://smebusinesslink.com
