All businesses go through 4 distinct stages of growth. In the early start-up days everyone is thinking on their feet, few formal processes are in place and sales funnels are still being constructed. Then the business enters the growth stage where things become more formalised and client relationships are maturing into the three to four-year mark. Staff are more secure, and turnover is decreasing.
Next is into the maturity phase, growing by about 5% annually with early employees entrenched with 8 – 10 years’ tenure. This is the stage where you feel most secure, with operations being predictable and revenue steady. But it is also the most critical period in your company’s life as this is when complacency may set in. This leads to the last growth stage for a business – renewal or decline.
Renewal equals customer growth
Your business’s final growth stage must start with identifying what customer value is still untapped in the business. The Pareto Principle or 80/20 Rule, says that 80% of your business wealth will come from 20% of your customer base. Since it costs 10 times more to acquire new clients than to sell to the ones you already have, focusing on existing clients should be a no-brainer.
To talk to and retain these all important existing clients, it is essential to provide value through the entire customer lifecycle; from when you acquire them to engaging them in meaningful conversations to retaining them by continually providing value – ultimately turning them into brand advocates.
Key relationships not just transactions
Engaging with your customers this way moves you away from a transactional approach to a more long-term partnership. But to do this your clients need to trust your company. Not just the sales team, but everyone at every touch-point. I have found this to be especially true for the B2B market. Clients want to do business with a business that continuously adds value to them – not taking their account for granted and making them feel that their business is important.
This more long-term approach means greater value to the right clients, in the right ways at the right times. Collectively, the long-term effect should result in greater customer retention, preventing churn and attrition, turning your clients into loyal advocates. So it is vital to have an ongoing and robust helicopter view of your clients’ sentiment. Don’t put your head in the sand. Be brave, ask the tough questions and then listen to the answers.
It’s not just up to Sales
Identifying who you regard as key clients must be done carefully with clear criteria, leaving you with a core group (your 20%) that is a manageable size. Implementing a more customer-focused approach is a different way of doing business and will require buy-in and advocacy from the highest levels within your organisation.
There will need to be acknowledgement and agreement to work differently with certain priority clients. If a key account is promised priority access to urgent products or service, Operations will need to provide it, not Sales.
Protecting your business against decline can most simply be done by growing value that is already in your business, both by investing in staff and by growing revenue from your key clients, renewing not only your business strategy but also your relationship with the people that enable you to do business.
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?
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.
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.
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.”
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.
“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.
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.
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.
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
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.
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:
- 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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