achieving sustainable business growth

Achieving Sustainable Growth

Comprehensive guide to how to grow your small business successfully and sustainably.


Table of Contents

Introduction..............................................................................Page 3

Planning for Growth..............................................................Page 4

Measuring Performance......................................................Page 5

Analysing Your Business.......................................................Page 6

Choosing The Correct Growth Strategy.......................Page 10

Implementing a Growth Strategy....................................Page 13

Managing Growth...................................................................Page 14

Conclusion..................................................................................Page 15

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Introduction

There has been much debate among business commentators

whether the theory that a business must ‘grow or die’ is true. While

the phrase has some merit, it does not quite fit every business type.

There is a strong argument to suggest the phrase should be modified

to say businesses should "improve or die."

Entrepreneurs are ambitious people, and it is in their nature to

strive to grow their business quickly. Despite the willingness and the

ambition to grow, few businesses do this in an effective and

sustainable manner.

When you analyse the business failure rates, it is interesting to find

out that many businesses that close are growing and hitting their

sales targets. However, the growth achieved was uncontrolled and

resulted in the business overspending and/or not collecting all the

cash they were due.

In these circumstances growth was the reason for business failure.

This white paper will provide small-business owners with a clear

understanding of what they should to do in order achieve

sustainable growth in their business.

Key Elements of Sustainable Growth

● Business Planning

● Business Analysis

● Choosing The Correct Growth Strategy

● Implementation of the Strategy

● Growth Management







Planning For Growth

Your business plan should be the key driver in all of your growth planning. It contains your revenue expectations, marketing plan and sales plan.

Your business plan should help you understand exactly what you need to do operationally in order to grow. Targets will be set for your marketing campaigns,

sales conversions and spending.

It is also very important to set targets for specific metrics that will help you understand your business and measure the success of your growth plans.

Below are some of the key performance indicators KPIs you should set targets for in your business plan then review performance against.

● Customer Acquisition Cost (CAC)

● Average Customer Spend

● Customer Retention %

● Attrition Rate %

● Referral Rate

● Sales Revenue

● Gross Margin%

● Net Margin %

● Overhead to Revenue %

● Variable Cost %

Ideally a business plan should be a “live” document that is updated on a monthly basis or when you have identified a significant change in the plan.







Measuring Performance

If you want to grow, you have to understand your business.

Understanding daily operations is not enough, to understand your

business you need to know the areas that it does well and the

departments that require improvement.

Understanding your business also means you are aware of market,

how strong it is and where it is going. You should also monitor the

performance and strategy of your competitors.

Regular reviews of the metrics laid out in the business plan provides a

business owner with insight to the strengths and weaknesses within

the business and allows them to make informed business decisions.

Regular performance reviews provide you with the knowledge to

improve your business. You should act quickly on the information

from the performance review to eliminate weaknesses and to

optimize your strengths.

Performance management helps you to build a more robust business

model. Growth without a strong business model can lead to problems

because the business cannot cope or finance extra staff or customers.

For example, if your customer growth rate is 10%, but you have a

customer attrition rate of 20%.

To achieve growth you should first to find why you are losing so many

customers and solve this problem. Only then should you proceed and

try and grow customer acquisitions.







Analysing Your Business

When choosing the correct growth strategy it is important to understand the forces

that affect your business.

There are three key tools to help you achieve this; these are

SWOT Analysis

One of the key tools of understanding your business is the ability to set targets,

review performance and explain variances against your plan. When the variance

analysis has been completed the most effective way to convey its findings to senior

management, investors or external businesses is by using Strengths, Weaknesses,

Opportunities & Threat Analysis (SWOT).

SWOT Analysis is very popular in business plans. However, it is a mistake to stop

using it once the business has been launched. It really shouldn't be limited to just

start-ups, established businesses should use SWOT analysis to ensure they are

aware of factors that affect the business internally and externally.

SWOT Analysis is also good because it is a fairly easy tool to use and can be

understood by all members within an organization.








Let's go deeper into SWOT Analysis

S - Strengths

After analysing actual performance against budget/forecast you should state which products, services or departments are doing well and why they are doing well.

W - Weaknesses

Similarly to strengths you need to highlight the weaknesses in your business and the reason why they are holding the business back.

O - Opportunities

Both internal and external factors should be listed in your opportunities section. You should be able to quantify the potential upside of maximizing your strengths. This section should include any market changes that may positively affect your business. It is not enough for just state the opportunities. You should go deeper and try to figure out how your business will capitalize upon them.

T - Threats

Internal and external factors should be listed in your opportunities section. You should be able to quantify the risk in the business associated your weaknesses. Similarly to opportunities, you should include any market changes that negatively affect the business and start to figure out how to avoid them or reduce the risk.








Pestle Analysis

PESTLE analysis is a tool to analyze the socio-economic factors that affect your business.

Political - Governmental policy and laws, also look for changes in political ideology.

Economic - Overall Economic environment, key indicators are the financial markets, currency markets, interest rates, unemployment rate and the inflation.

Social - Track any population or demographic changes in the region that your business trades.

Technological - Identify any advances in technology that may affect your business. A great example of this is the growth of Cloud Computing over the past few years.

Legal - Specific laws that may affect your business, for instance a change in employment law.

Environmental - analyze this from the legal and social perspective to understand what is expected from your business.








Porters Five Forces

Porters 5 forces looks at the potential threats to your business. This is a great tool to understand the factors that affect your business most.

According to Porter there are five forces that affect a business in any market or industry.

Potential Entrants - How easy is it for a company to enter your business's market or industry. The more difficult it is for competition to enter your market puts your business in a stronger position.

Potential Substitutes - Assess how easy is it for your product/service to be replaced.

Power of Suppliers - Does one supplier have a monopoly on supplying the product that your business sells? If so the supplier has bargaining power over your business.

Power of Buyers - Think about how essential your product is to your customers, is it easy for them to choose another supplier. The easier it is for your customers to choose another supplier, the more power they have over your business.

Level of Competition - How many businesses are you competing with? The more competitors your business has the more in danger it is in.







Choosing The Correct Growth Strategy

Choosing the correct growth

strategy is crucial to your actual

plan.

There are many available to

business, the important thing is to

choose one that fits your business

and is sustainable.

For instance if you have cash flow

problems and want to grow sales by

reaching new markets.

A far more sensible and cost

effective plan would be to invest in

an online sales platform rather than

opening a new office or location.

If you choose the wrong strategy you

could be setting up your business to

fail.







Growth Strategies

1. Open up in a new location

If your business is doing well, you

should think about opening in

another location with the same

demographics as your current store

or office.

2. Franchising

If your business model is working

and you have a well established

brand, franchising your business is a

low risk quick and inexpensive way

of growing your business.

Franchising is also a good way of

raising capital without approaching

private investors or banks.

3. License your Product

When a larger company licenses

your product, they take over the

manufacturing and distribution of

your product. The company that

licenses your product is called the

licensee, and they pay you royalties

on any sales of your product.

4. Form an Alliance

Forming a strategic alliance with a

similar or larger company will allow

your business to reach a broader

market.

5. Diversify

Diversification can be done in two

ways, you can market your existing

products to a new market or sector.

6. Route to Market

You can grow your business by

increasing your sales channels.

Think about increasing your partner

network, try and find new stores to

buy your product.

Another great way of growing your

business is by increasing your online

presence, try selling your goods on

eBay or Amazon before opening up a

stand alone online shop.







Growth Strategies

7. Merge with another or buy

If you want to grow your business

quickly and you have enough

capital buying or merging another

business may be an option.

8. International Expansion

Many small business owners

discount this as an option, but

there is no reason why small

businesses cannot become global

businesses.

8.Promotion or Price Change

To increase market share you

reduce your prices. However this

should be done with great caution

to ensure you keep profitable.

9.Increased Marketing

You can increase market

penetration by running additional

marketing. Ensure your marketing

is measurable.

10. Delegate

By delegating less day-to-day tasks

to staff this should give the

managers/owners more time to

plan and implement growth.

11.Develop New Products

Release a market leading product

to grab a bigger share of the

market.

12. Turn Your Customers into Salespeople

This is an increasingly popular

growth strategy. Leverage the

power of referrals by offering your

existing customers an incentive to

recommend your products to their

social groups.







Once you have decided the correct growth strategy in place you have to make sure

you can implement the plan.

The next stage is really to ensure that you have all of the prerequisites to achieve

the growth, otherwise you plan will never be realised.

Before you start your implementation you should ask.

Do you have the cash to buy extra stock or invest in a new website?

Are your sales force trained to sell new products or services?

Do you have enough staff to handle increased customer demands?

To implement your growth plans you need be comfortable you are not

overstretching yourself and not jeopardizing existing customer in the search for

new ones.

Implementation Checklist

● Growth plan has been approved and is funded

● Key performance indicators for growth plan have been defined.

● Staff understand the plan and their role.

● Your business systems and staff can handle increased demand.

● You have allocated time to monitor plan against actual results.

● Additional staff training has been planned.

Implementing a Growth Strategy







Managing Growth

To manage your growth plan effectively you need to:

1. Track actual results and metrics against your plan

regularly.

2. Update your plan if there has been any significant

changes.

3. To ensure staff will deliver success ensure they are

motivated, reward them if meet targets.

4. Make sure that your plan is communicated across all

of the business and everyone knows what their tasks

are.

5. Do not focus solely on the growth plan, make sure the

business is still performing in all other areas.

6. Make sure your cash flow can sustain your growth

plan.







Conclusion

Growing a business is not easy, it requires funding, detailed

planning and monitoring to ensure you do not over stretch

your resources.

Once you build a sustainable growth model, it can reap your

business tremendous rewards for your business.

The work does not stop with just managing growth. As your

business grows it becomes more complex and requires more

management support with strategic planning, business

systems and performance management.







About Us

We focus on helping small businesses achieve better results

through business planning, performance management, operational

efficiency and financial management.

Our clients typically grow their business by 20%-50% over the year while cutting costs by 30%

We provide our clients with four key services that allows them to

access to our expertise on their own terms and schedule.

These are:

● Business Mentoring

● Business Consulting

● Micro-Consulting

● Outsourced Business Analysis and Financial Management.

Contact Us

3rd Floor, 207 Regent StreetLondon W1B 3HHEmail: [email protected]: +44207 286 7829 / +44 7825 002 908







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