What’s happening in your business? Are you growing? If not, read this Frank Colli blog and you’ll know why it is important that your business is moving forward.
Growth can come from either growing your revenue or growing your profitability.
The reality is that unless your business is growing year-on-year by at least 15% you are going backwards.
Companies that find it easier to focus on growing their profitability by focusing on finding efficiencies, cost cutting, consolidation and maintaining the current customer base should know that this by itself is a recipe for failure.
Many business owners who successfully run small to medium businesses and make tidy profits think this is business as usual. If that’s you, you may say, “What’s wrong with that?” Sadly, the world is becoming a smaller place primarily driven by technology. This means markets, technology, services, customer needs and the competitor environment can change very quickly.
One of the real problems is that customers are becoming more knowledgeable and are expecting more for less. It’s called commoditisation. Just look around and you will see that the world is commoditising, which is resulting in larger companies. Indications are that there will be a few big players and a number of niche players; the rest will cease to exist.
So the question is not IF this will happen to your market, but WHEN. So if you’re doing nothing about growing your business then hopefully you are close to executing your exit strategy. The problem with an exit strategy is that no matter how big or small your company is, the new investors will be looking for future returns, consistency of the business, the risks to their investment, and what systems and processes are in place. All these things determine the multiple they will pay and give you a happy retirement.
Small corner shops are disappearing and we all know what happened to the small hardware stores.
If you are doing well, at some point in time someone will notice that you are making good profits and will work out a way to capitalise on them for themselves and commoditise your market. You should ask yourself where your business is today and when this commoditisation will occur in your market segment. Where will that leave you? This is why growth is so important. It’s not about just making more and getting more headaches, it’s about survival.
Growth can occur through many avenues but the two main methods are organic expansion or acquisition. The problem with growth is that it requires change and that creates difficulties such as the need for improved systems, the right people, cash flow, trade and banking facilities just to name a few. You need to get this right before growth occurs.
To create organic growth you need a clear understanding of what your value proposition is, who your ideal customers are, whether you need to expand your market segments and finally, ascertain if you have the right staff to achieve this.
Acquisition is all about finding a company that is a strategic fit, knowing what value the acquisition will deliver, what the impact is of their culture fit to your people, and how this is going to be funded?
As you can imagine, these topics may open a can of worms. But not addressing them is why a vast number of companies go out of businesses: 71% fail in the first 10 years. Out of the remaining 29% of companies who survive only 5% ever get sold for more than $1.
This is why you need to grow your business and why eccoConsultants is here to help you to achieve it.