Problems Growing Companies Face
In this article, I identify a company’s Growth Stages and discuss the common issues, success factors and problems for each particular stage. As a Company grows and matures, it is important the organisation understands how to plan effectively for new challenges, issues, markets and problems. A good Business Plan will identify issues a company encounters when thriving, and how to overcome these challenges and obstacles in a Strategic Plan. Here is a checklist of the growth stages companies experience and their inherent issues and challenges.
Small Business Growth Stages – The Characteristics and Challenges
– Basic Existence Stage
- Main Issues and Characteristics
- bringing Customers
- Delivering the product and service
- workable Services
- Expand from key customers to broader sales base
- Have enough Cash on Hand to cover Cash Flow demands
- proprietor performs all Management functions
- Often a lack of Planning & Systems
- Business just trying to continue viable
- Have yet to stabilize production or product quality
- Trying to gain sufficient customer acceptance
- Business has strong demand on the Owner’s time, cash and vigour
– Survival Mode Stage
- Main Issues and Characteristics
- Business demonstrates viability as business entity
- Satisfies a base of customers
- Focus shifts from existence to managing Cash Flow
- Generate enough Cash Flow to break even, stay in business and finance growth
- Focus on Market Niche exploitation
- Simple organization and the owner begins to delegate to a manger. However, strong direction and control still rests with the Owner.
- Planning concentrates on Cash Flow Forecasting
- Systems evolution & execution in early stages.
– Obtaining Success Stage
- Main Issues and Characteristics
- Exploits its Market Niche
- Obtain Strategic goals
- Expansions is important but stability, control and profitability are key as well
- Owner’s Options:
- Expand and Grow the business
- exert Stability as a means of support to the owner
- Owner considers disengagement from the business
- Market penetration
- Competitive Edge
- Functional Management & Owner Delegation
- Management & Key Employee Competence
- Generating sufficient Cash Flow
- Planning for rough patches
- Professional Staff: i.e. Controller, CFO, CEO
- Production/ Service, Marketing, Strategic and Financial Systems established
- Operational Budget Management
- Growth Strategy Options
- Consolidate Company, develop efficiencies and marshal resources
- Use Retained Earnings and Cash Flow, leveraged with Finance, to grow the Company
- Cash Flow Management & Profitability are key concerns to finance growth goals
- Develop Key people and management
- Strong Operational and Strategic Planning
- Growth requires the owner’s deep involvement (verses disengagement)
– Rapid Growth Stage
- Main Issues and Characteristics
- Committed to a Growth Strategy
- Concerned with adequately financing the growth stage
- Need good ownership delegation to improve managerial effectiveness.
- Enterprise develops complexness. Performance Control Systems are important
- Established Expense and Budget Controls to maintain strong Cash Flow.
- Profitability Planning Systems are critically important
- Effective Financial Planning, Forecasting, Modeling and Strategy
- Very skilled, experienced and competent Management Structure
- Company systems are tested, adapted and highly delegated, but there is strong Strategic Leadership from Top Management
- Capacity to become a big business
- Strong Potential for Business Sale Premium
- Effective Delegation and reliance on talented Managers & Key Employees are keys to success
- Founding Entrepreneur(s) can opt out of business and have a more advisory role
– Maturity Stage
- Main Issues and Characteristics
- Consolidate and Control profits
- Retain advantage of relative small size, nimbleness and flexibility
- Quick market change response time
- Still retains the entrepreneurial spirit
- Growth causes inefficiencies so must ensure the Management Structure continues to grow and evolve. Strong Managerial Talent
- Strong Budget, Operational and Strategic Planning capability and focus
- MBO System (Management by Objectives)
- Cost Systems
- Extensive & well developed company systems and Management Structure
- Strong Financial Resources
- Convert Entrepreneurial spirit to a Formidable Market aim
- Strong Market Niches and Competitive Edge
- Exceptional Risk Management
- Profitability boosted by successful Innovation
- Strength in Market Branding and Recognition
- Maintain Competitive Edge by anticipating Market changes and adapting better and quicker than competitors
In the capacity as a Business Consultant, I work with a lot of different businesses in different stages of growth and experiencing different challenges. I do find that this Growth Stage Checklist is pretty accurate. While never perfect, it is an excellent tool to employ in anticipating and fixing problems that arise as a company grows and matures, from one stage to the next. Keep this checklist in mind when analyzing your business and in particular, when you develop your Strategic Plan’s SWOT Analysis. This checklist also lets you know as a business owner where your business should be. If you are on the negative side of things, then you have opportunity to fix problems. If you are sitting hunky dory and ahead of the curve, then give yourself and your team credit. But understand that can change anytime, so keep the upcoming growth challenges in mind as you plan your company’s growth. This checklist will serve as a fantastic foundation to your forecasting and strategic planning. Understanding the challenges that may be ahead is one great way to effectively put plans in place to overcome these common obstacles.
About this Article’s Author
Frank Goley is a business consultant, business turnaround consultant and business plan consultant for ABC Business Consulting. Frank is considered an expert in writing, developing and implementing business plans, business turnaround plans, business funding plans, marketing plans, strategic plans and web marketing plans. Frank offers comprehensive business consulting, business coaching, business turnaround consulting, along with web seo, web development and web marketing consulting, to small and medium size companies.. Frank is the author of a business plan book, The Comprehensive Business Plan Workbook – A Step by Step Guide to Effective Business Planning, and he has over 50 published articles on business success strategies. He also writes the Business Success Strategies Blog.
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