People aren’t born knowing how to drive a car, yet millions learn. Likewise, CEOs aren’t born knowing how to grow companies, but they can certainly learn how.
There are countless parallels between driving a car and growing a company. If you don’t know how to drive, you drive slowly and stay in first gear. But once you’ve learnt, you soon discover that driving in fifth gear is much more exciting than driving in first.
The same is true for company growth. If you don’t know what to do, or why your company has grown in the past, trying to grow is a scary prospect. But learn the basics from people who have grown companies, and you’ll find it’s not such a daunting process after all—in fact, it can actually be fun!
THE CENTRE FOR BUSINESS GROWTH TEACHES CEOS HOW TO GROW.
ANZ Bank is the Foundation Partner of the Centre for Business Growth. Through this partnership, we have developed our Business Growth Program. To date, we have worked with over 75 companies across Australia with revenues between $5m and $50m, helping their executive teams understand what they need to do, or stop doing, to grow. Many of the companies come to us when they’ve hit a ‘speed bump’ that has slowed growth, and they’re not sure what to do next. That’s when the magic really happens: working together through our Business Growth program, we help companies achieve real growth.
SO HOW IS IT DONE?
If you’re willing to make hard choices, shift gears and drive growth, here are some tips:
1. Re-evaluate your products and services
Every company begins with an idea. It could be how to capitalise on an emerging trend, a customer need, or even a product or service that an entrepreneur wants to develop or distribute. But when a company’s growth has stalled, executives need to re-evaluate their offerings and review which of their products or services are performing best. Are there are any weak links in their value chain? Or are they providing the types and levels of service that customers expect? This constant evaluation process enables executives to determine the efficiency of their company and ensure they’re not burning cash on offerings that aren’t profitable or providing value.
2. Identify new markets and customers
Customers and markets are critical to growth. You can have a great product or a break-through technology, but if no one is willing to pay for it or use it, you’ll be out of business. In order to grow, leaders need to follow market trends, collect market data and information, track competitors, design products with their customers, and be completely market and customer focused. Executives must be able to identify their ideal customers and not make the mistake of thinking that all are created equal. Sometimes customers end up costing money because they don’t pay on time, need extra attention, or never seem to be satisfied. Others can buy a lot of product, but at a price with such low margins that you can’t cover your overheads. Businesses must develop a plan to reach more ideal customers in more markets, and cut back on customers who provide no strategic value.
3 - Manage externalities, competitors and strategy
If executives are serious about their growth strategy, they need to think about identifying new customers, developing new products, or selling new products to new customer segments. They need to keep a constant eye on the road and their environment to ensure they don’t crash due to externalities like competitors, technology disruptions, changing government regulations and exchange rates. If you want your company to survive, you need good information, well-developed processes, a plan, and the discipline of execution and implementation. Externalities are not within your control, but if you fail to track and assess the risks, you endanger your company—and that could lead to failure.
Just like you need petrol to drive a car, so too do you need funds to grow a company.
4 - Financing growth—cash flow is the lifeblood of your company.
Most companies grow through debt financing (borrowing from themselves, family trusts or banks) and don’t explore government grants, R&D tax credits or equity investors. But before you seek funding, make sure you’re managing what you already have. Depending on what you charge and when, it’s always preferable to structure payments with a deposit. Getting payments once you’ve delivered your product or service ruins your cash flow—and this is the lifeblood of your company. Make sure you invoice clients promptly, follow through on receivables that are due and not paid, and encourage customers to pay promptly by providing inducements for early payment.
5 - Building the organisation, planning and selecting the right people
By far, some of the largest and most common challenges companies experience are organisational: be it a weak or ineffective culture, no plan, people who are not performing, customer information systems that are lacking, or even CEOs who do not understand their leadership roles and responsibilities. All these factors can significantly hinder growth. The CEO should establish the company’s goals and the strategies that are required to achieve them. As the company grows, the planning process should allow contribution from both the executive team and key employees. This is incredibly important for engaging staff; it keeps people motivated, provides meaning and makes each person’s job significant. Employee morale can be likened to the engine temperature in a car. If employees aren’t motivated, or if the culture is broken, the engine—the heart of your company—will start to overheat, then begin to slow down and falter.
6 - Measure, measure, measure!
Professional race car drivers constantly measure before, during, and after each race and look at their statistics to understand what they can do to improve performance. They measure tyre pressure, RPMs and turning speed, then use the data to understand where they need to shave a second or take a tighter turn in order to enhance performance. CEOs and executives should take the same approach—they need to constantly measure all the components of their company in order to understand what is and isn’t working. As Dick Schulze, founder of Best Buy, once said to me, “If you don’t measure, you don’t know what’s working or not, what needs improvement, which employees are performing extraordinarily, and whose performance to reward.”
7 - Managing yourself personally and as a leader
CEOs also need to understand how their roles and responsibilities change during the various stages of growth and how their behaviour impacts their company’s growth from one stage to the next. It’s important to delegate, communicate and plan ahead in order to keep from becoming the bottleneck of company growth. CEOs must focus on working ‘on the business’ rather than ‘in the business’. CEOs must also be careful not to wear themselves too thin. If they start burning out, aren’t communicating frequently, don’t attend to company culture, or aren’t sensing when others around them (staff or family) are burning out, then the RPMs of the company’s engine may be too high and the company could be close to break down. Delegation is a critically important skill for leaders. If executives delegate, they free up their time—and brain—to focus on leading and growing the business.