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Performance & Growth

6 Signs That You Should Stop A Business Expansion In Its Tracks

Sometimes, forces beyond your control – like market tides – don’t work in your favour. You have to know when to call it quits.

Cris Burnam

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For entrepreneurs, embarking on a business expansion is often a point of pride – a clear sign that their vision is coming to life and customers are finally recognising the value of their company. Yet, expansion remains risky, even for those who have done their due diligence. Despite good intentions, plans go awry – often due to factors beyond the entrepreneur’s control.

Of course, growing pains are a part of the process, and a few bumps along the road don’t necessarily mean you should scrap your plans. Expansions, especially those involving multinational components, will likely generate new issues related to employee liability, tax and regulation responsibilities and contracts with new and original equipment-manufacturer partners.

Related: The Most Common Mistake with Global Business Expansion

Here are just some of the natural hurdles you may have to surmount to see an expansion come to fruition.

1. Your expansion lacks a clear, specific purpose

While an expansion may be lucrative, money alone shouldn’t drive your plans. If you can’t immediately answer why your expansion plan makes sense for your particular product or service or, more importantly, how it will benefit customers, you likely don’t possess a clear sense of purpose.

Additional revenue from expansion should always be in the service of a greater goal. For example, increased economies of scale might enable you to produce more in-demand products.

2. The finances are unsustainable

While it’s true that you must spend money to make money, it’s also important to understand where the money will come from and how it will impact your overall finances.

Have you secured venture capital funding? If so, will that stake in future profits justify the potential for revenue growth? Taking on additional debt may or may not be an option for you in the current lending market. If it is possible, carefully analyse your debt-to-equity ratio to avoid an untenable situation.

3. Your customer experience is deteriorating

Don’t jeopardise any long-term customer relationships by stretching yourself too thin through an expansion.

Remember: Gaining a new customer is five times more expensive than maintaining a current one.

Even if you don’t thrive on repeat business, you may still fall into the trap of putting robust sales growth goals ahead of your customers’ needs.

Related: Expansion Insights From One Of SA’s Power Partnerships

4. You can’t find the talent to execute your vision

“Hire the right people” is a mantra that successful businesses share, and it’s also something many struggle with. One study by Robert Half International revealed that 36 percent of 1,400 executives surveyed said the top factor for an unsuccessful hire was a “poor skills match,” while 30 percent cited vague performance objectives. Other experts accredit unsuccessful hires to misleading job descriptions.

Whatever the reason, you cannot afford a hiring faux pas when you’re entering a growth phase. Put in the time and effort yourself to ensure you’re finding internal “brand ambassadors” who can usher your organisation into a new era. To avoid miscommunication, ask those actually performing the job to craft the job description.

5. Market forces are working against you

Business-woman-in-car

Unfortunately, the market tides won’t always turn in your favour, and it’s important to know when forces beyond your control will likely make the venture too risky.

Recently, my company had to abandon a plan for a 50,000-square-foot expansion in Saskatchewan, Canada, largely due to market saturation and the area’s worsening economic environment. This was an important lesson in expansion for me, and it’s not one I’ll forget any time soon.

Related: How to Predict Your Business Performance

6. You haven’t prepared

Any business owner should begin with a few key steps before executing an expansion plan. First, develop a sustainable and actionable growth strategy that makes sense for you, and do your homework to get the details right.

You should always take care of your customers throughout the process, and that requires getting the right people on board.

Finally, don’t be afraid to pull the plug for the greater good of the organisation. No simple formula exists for successful business expansion; the outcome depends on the unique attributes and challenges that individual companies will face. But keeping these six situations in mind as you expand your venture will help you mitigate risk and maintain a structured plan of attack.

This article was originally posted here on Entrepreneur.com.

Cris Burnam has been working in the self-storage industry since 1987. He has served as president of StorageMart since founding the company with his brother, Mike Burnam, in 1999. Burnam grew StorageMart from a single self-storage facility into the world’s largest privately owned self-storage company with 149 locations across the U.S. and Canada. Burnam was named a 2014 EY Entrepreneur of the Year in the Services and Real Estate category (Central Midwest region) -- one of the highest honors an American entrepreneur can receive.

Performance & Growth

5 Lessons On Scaling Up Your Company From An EOY Winner

It takes a combination of grit, hard work and the right strategies to navigate the challenges of the scale up journey. What do some entrepreneurs do differently to make it to the top?

Louw Barnardt

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Building a successful company is really hard. Even when you have made it through the start-up phase – product development, market fit, building a team, earning first traction – the process of scaling up remains a challenging road.

Louw Barnardt CA(SA), recently named the Emerging Entrepreneur of the Year at the Sanlam/Business Partners Entrepreneur of the Year® Awards, shared his five top lessons learnt from fast-growing clients and from their own journey of scaling up Outsourced CFO to twenty five full time professionals.

“There are many stumbling blocks that hinder exponential growth at the scale up phase. Successful start-up founders do not always have the right skill set and experience to build a business from five to fifty people or from twenty to two hundred.”

Louw and his team have taken the concept of an ‘Outsourced CFO’ – a go-to finance person for emerging companies – and built a very exciting business from it. “There are hundreds of lessons one learns on the journey of building a scale-up company. These five stand out among all of the biggest lessons learnt.

1. Invest in People

Doing business is all about people. In start-up phase, founders are able to manage almost everything. From the social media post to the invoicing to the recruitment – it all falls on you. One founder can manage this for a short while and a founder team for a bit longer, but somewhere between five and twenty people this changes. The founders can no longer make every call, have every meeting, answer every client query.

It’s critical to build a solid leadership team and then to equip them with enough autonomy and authority to run with the various portfolio’s within the company. Put a head of HR, head of sales, head of client engagements, head of operation and head of finance in place as soon as you can and keep investing in them – it’s the only way to scale out of start-up mode.

Related: The 4 Steps To Scaling Your Start-up To The Next Level

2. Manage Cash Flow

The finance function sits at the heart of every business. If the numbers don’t add up, everything comes to nothing quite fast. Founders need to make sure that they have a firm eye fixed on financials. New cloud systems enable entrepreneurs to have access to every detail of revenue, profitability, debtors and cash flow in real time.

That’s right – exact live financial information at your fingertips for decision-making. Foreseeing cash crunches ahead of time and actively being able to navigate to avoid them makes all the difference in the scale-up process. Growth eats cash, so be sure to manage yours on the way up.

3. Streamline and Automate

A start-up can afford to do what needs to be done in the moment. Scale-ups cannot. Automation of company processes is key to enable scale in various company functions.

Automate your sales process with a tool like Sales Force or HubSpot. Automate your marketing with a tool like Hootsuite. Automate your finance with a tool like Xero. Automate your company culture input with a tool like Hi5. Putting a good system in place and investing in the understanding and utilisation of all of its functions is a prerequisite for high growth.

4. Prioritise Strategy

As execution becomes a bigger and bigger part of your company, the strategy that directs that execution plays an ever-increasing role. The most successful management teams set and stick to good habits around strategy: Annual breakaways to direct long term strategy. Quarterly strategy days to cement key strategic priorities for the next 90 days and the likes.

It may seem counterintuitive to have your full management team out of action for so many full days of work, but putting the right strategy in place to execute is the real deep work required to scale.

Related: Infanta Foods’ Marisa da Silva On Why Scaling Is Tougher Than It Seems

5. Brand and Awareness is key

The value of owning a top brand and of being top of mind with all your stakeholders cannot be overstated. A stronger brand lifts the market’s perceived value of your offering. Continuously starting conversations and finding ways of reminding your networks and target market of who you are and what amazing things you are doing opens up ever-bigger opportunities that play a huge part in creating scale for our top entrepreneurs.

“Building a company is hard work. But if you do it smartly, the juice is worth the squeeze many times over. Make these five lessons your own to hack the scale up journey as you build the business of your dreams.”

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Performance & Growth

Use Growth To Help You Live Like A Hero

Often strengths become weaknesses as we progress through our business journey. If you want to remain the hero, you need to focus on growth.

Erik Kruger

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“Do our heroes fall from grace? Sometimes.

However, what makes them a hero is that they fight and crawl their way back to the top. You aren’t a hero because you were once great. You are a hero because you continually strive to be great.”

I am a big Batman fan. The 2008 film, The Dark Knight, gave us an iconic line. In it Harvey Dent, who later becomes Two Face, says, “You either die a hero, or you live long enough to see yourself become the villain.”

It’s a cutting view of a fall from grace: How our heroes often become vilified through their actions or our perceptions of them.

But I would like to suggest a different context for this quote. As an entrepreneur, you must develop certain qualities and characteristics to become successful. The problem is that those same qualities and characteristics, once the tools that pushed you to success, can at a later stage become the stumbling blocks that prevent you from progress.

Growth beyond abilities

Here’s a quick example. You wake up one morning with a great idea. Soon after, your idea has been translated into action and your business is up and running. You find yourself jumping between different roles. Sales. Marketing. Accounting. Operations. All your time and energy gets funnelled into the business. You work late at night. Sure, it impacts your social life but at least you don’t have a family to worry about.

Related: 5 Fierce Ways To Become The Ultimate Entrepreneur

Then, growth. Things change. And your superpowers become weaknesses. You need to hire a team to help with the increasing demand on the business. But you struggle to let go. You want to hang on to your ability to control every aspect of the business. It’s how you have always done it. It’s what led you to success. However, the business requires you to change with it. To learn a new skill; finding the right team and trusting them with your dream.

You might then find yourself in a serious relationship or married. Perhaps even a kid. And the amount of time that you can dedicate to the business is impacted. You must find ways of staying productive at work while making time for your family and close relationships. Your previous ability to pull all-nighters becomes futile in the face of new expectations as you need to divide your time in a meaningful way.

What once was a strength now becomes a weakness, and this happens much faster than you might think. So, how do you prevent your superhero abilities from withering?

Truth in reflection

Everything we do starts from knowing. You would be surprised to know how much of your behaviour is driven by subconscious programming that you grew over the years.

Since this behaviour becomes a part of your identity it becomes almost impossible to see how it affects the way you interact with the world and those around you.

So, the only way to really create a new set of behaviours is to pause the auto-play function. And for this to happen you need self-awareness and reflection. You do this by creating time for meditation, journaling, and spending time with a coach or mentor.

Perpetual Evolution

In my experience, entrepreneurs are pretty good at learning new things. Especially in the early days. So, as your business grows, you need to grow with it. Unfortunately, many entrepreneurs get left behind. It’s much more ideal if your growth drives business growth than the other way around.

I am not going to harp on about this because I think there are more than enough resources that can help you to evolve your thinking, and they aren’t hard to find, in fact you are holding such a resource in your hands right now.

Related: Want To Achieve Greatness? Be 1% Better

People Are Mirrors Too

The people around you are pretty good at holding a mirror up to you. They aren’t always aware that they are doing so. They hold up the mirror by reacting to you in a certain way and by speaking to and about you in a certain way.

If you are paying attention, then you will pick up on the clues that they leave behind. You will be able to read between the lines and hear their cries for support, encouragement, and trust. But of course, what you are seeing is not a reflection of them but rather a reflection of you.

What part of your identity is robbing people of support? What have you done that created a culture of mistrust?

It all comes back to you and the way you have been conditioned and how you are, in turn, conditioning those around you.

You can stay the hero

That’s why you can’t give up. Heroes don’t give up. — Kiera Cass

 

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Performance & Growth

The Secret To Growth For SMEs May Be Found In An Audit

Despite the cost vs benefit argument and the burden that obtaining an audit places on the company, the advantages may outweigh the disadvantages.

RSM

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An audit is an inspection of your business accounts, including accounting systems documents and invoices. The goal of an audit is to determine if the financial statements are representing an accurate view of the company. However, not all businesses need to be audited. In the case of companies, the Companies Act (“the Act”) clearly stipulates which companies require an audit and the requirements are confined more to larger companies.

These requirements exclude a large number of small companies, which contribute 98% to the South African economy and they deliver approximately 28% of jobs in the country (Business Tech; 2018). Small companies are excluded because there is generally no distinction between ownership and management, so the audit objective of giving assurance to the owners becomes less important. Where the owners are not the managers but the company is still small, the Act provides a less onerous “Independent Review” option.

However, some smaller companies still benefit from an audit process as opposed to a review.  Keeping in mind the cost vs benefit counter argument, recent publications in The Accountant (2018) and by Roberge (2017) explain some of the major benefits are as follows:

An audit:

  • Assists in obtaining funding from investors and banks – Providing these parties with audited financials will provide them with certainty and comfort that investors will get a return on their investments and more certainty that the loans will be repaid.
  • Identifies problems and weaknesses within the company’s accounting system where the system might not be tracking certain transactions correctly.
  • Uncovers fraud – This includes instances where employees or management are stealing inventory or other assets from the company. An auditor may be able to identify discrepancies and assist the company in implementing systems that will eliminate these problems in future.
  • Identify poor accounting practices – It is hard to see these issues unless you can view the overall picture, which is possible with an audit.
  • Improves tax planning – An external audit can assist in ensuring that you are ready for tax season and that you are leveraging tax write-offs and benefits as much as possible. By having proper records and planning, taxes are less stressful and easier to file.
  • Strengthens the credibility of the company’s financial records – This is important if you are planning to sell the business in a couple of years time. When you have documented information that demonstrates the success and progress of your company over multiple years, then it will be easier to prove the financial security of the business and make it more appealing to buyers.
  • Provides a clear understanding of the financial situation of your company – A good audit will ensure that your accounting records give you a precise picture of everything that is occurring within your business so you can make accurate judgements about the financial situation of your company.
  • Educates business owners by emphasising the importance of accounting information in business – Auditors may provide business owners with information on current accounting issues, educational seminars to improve their companies’ accounting process, and other “added value” services.

Despite the cost vs benefit argument and the burden that obtaining an audit places on the company, the advantages may outweigh the disadvantages. Therefore small companies should carefully consider the above points and, if appropriate, volunteer to be audited.  This will not only assist them as they grow, it will also yield other welcome unexpected benefits.

Read next: My Business Is Growing… What Now?

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