Why? Because getting bigger is different from growth.
Getting bigger might involve increasing customer numbers, sales or taking on more staff.
Growth is more about growing margins, growing profitability and growing in the right strategic direction for your business.
Getting bigger doesn’t automatically translate to business growth. In fact, increasing in size can impede small business growth if you’re not careful. Here are the four key questions to ask yourself in order to grow your business effectively.
Am I focusing on the right things?
In the initial years of starting a business, it’s natural to want to be across every little detail, and to be involved in every decision, however small. As your business gets bigger, you’ll need to sharpen your focus on the areas that benefit your business most. While business processes and performance reports might not seem necessary in the early days, they become essential as your business grows to help you identify where you can make a better contribution to profitability.
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Areas to focus on include:
- Product or service margins: What are your most profitable revenue streams? Are there areas of the business that are consuming a disproportionate amount of resources? This includes your own time. You’re the most important resource in the business – are you spending your time where it counts?
- Profit margins: Is your business scaling? Where can you be more efficient?
- Sales channels: Where do the majority of your sales come from and where should you be concentrating your efforts? Are there sales channels you put a lot of effort into that don’t generate much in terms of actual sales?
What is my strategic direction?
Are you clear on your goals and the vision of your business? Are you on track for reaching these goals? You might need to make a strategic investment in order to achieve your business goals. If you do invest, do you have the framework to monitor these initiatives and make sure they are getting the return you anticipated?
Do I have a clear view of my cash flow?
Are you keeping a tight rein on your cash flow as you grow? Are you managing your cash inflows so that you are always able to pay your debts as they fall due? Many businesses, though profitable on paper, stumble and fold due to lack of cash. This is a particular risk if you are growing quickly and you are paying suppliers before you are collecting cash from customers.
Do I have clear processes to manage my business?
It is far easier to set up the processes and tools you need to keep on top of these key growth indicators than to bounce into action only when issues arise. These tools will help you focus and allow you to keep working not just in the business, but on the business.
How have you managed small business growth and what lessons have you learnt along the way?