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Growing your small business

26 July 2016 by National Bank
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Growth can be a major challenge. It takes time and resources to grow, and both are often in short supply. So how can you successfully manage the growth of your business? To find out, check out this article—it’s a quick three-minute read.

“A lot of businesses fail while pursuing potentially good ideas because they take on opportunities that lead them away from their goals,” notes André Menand, Director of Entrepreneurial Experience Development at the École des Entrepreneurs du Québec. The takeaway? Smart growth management is essential.

Focus on business development

Often resources or financial means are limited, which is why it can be so hard to expand. “To grow, you need to find opportunities that are profitable in terms of both time and money, that you can assign to other members of your team and monitor with relative ease,” says Menand. In other words, you need to find your cash cow!

This could be a lucrative contract for a regular client that keeps your business humming along without increasing your workload. The idea is to free up some time and money which can then be spent on business development. About 10 years ago, Menand developed the Growth Wheel, a growth model for small- and medium-sized businesses. “The wheel identifies the various steps that most companies take in order to grow. There are four different phases, each with its own challenges.”

Phase 1: penetrating the market

“The first is market penetration—generating as many sales as possible to keep your company alive and pay yourself,” says Menand.

At this point, it’s important to measure and analyze the sales of products and/or services, and assess the consumer’s level of satisfaction in order to adjust the strategy if the established objectives are not met.

Phase 2: becoming profitable

The second step to managing your business growth is making your sales count: being more selective and concentrating on the most profitable clients and products. At the same time, you need to structure your business and optimize your process in order to reduce costs and increase your profit margin.

Phase 3: maximizing sales

In the third phase, businesses maximize their sales by analyzing the needs of their clients and improving how those needs are met, sometimes by developing related products. “An example would be a lawn care business that teams up with a subcontractor who specializes in painting patios,” suggests Menand.

Phase 4: pursuing growth in new markets

In the fourth and final phase, entrepreneurs can pursue growth in new markets. This can only be done if the business is running smoothly and as many operational tasks as possible have been delegated to employees and associates. “It’s only when you’ve reached that point that you’ll have the time and resources to develop new opportunities,” says Menand.

The right questions

Anabela Neves, Senior Manager for Montreal’s SME Market with National Bank, specifies that having a strategic plan—one that’s based on a solid business model—is key to successfully navigating growth. “It’s the foundation of any business initiative,” says Neves. “How do you position yourself as an entrepreneur? Where do you want to go with this business? When you follow a strategic plan and update it regularly by incorporating goals achieved and obstacles encountered, you set yourself up for success.”

Common mistakes

Lack of vision

According to Menand, one of the most common mistakes made by entrepreneurs who fall short of their business objectives is failing to clearly define a vision for their business activities, which makes it impossible to develop a clear business strategy. “When you know where you’re going,” says Menand, “you’ll know which business opportunities are worth exploring and developing and which are best left untouched.”

Impulsiveness

Failing to properly analyze opportunities can lead to decisions that ultimately prove fatal to a business. “An entrepreneur might sign a contract with a retail giant, for example. Extremely tempting, but also potentially crushing,” says Neves. Major retailers like Walmart and Costco have very high product quality standards and take a long time to pay invoices, which can stretch a company’s finances too thin. “Ninety days can be a very long time to wait for a cheque. Without a safety net, your company could go under,” adds Neves.

Being a smart entrepreneur means not rushing into anything or making impulse decisions. Ask yourself if it’s the right opportunity—and the right time—to grow your business.

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