10 tips for growing your business sustainably
Growing your business can mean achieving your financial targets, increasing employment and fuelling the economy. But you also want to be a resilient business around for the long term. Knowing how to avoid the hazards that can accompany fast growth allows you to manage your growth in a sustainable way, by finding the right balance between growth and overstretching.
1. Have a plan
Creating a business plan for growth and reviewing it regularly can help you to spot any issues across areas such as cash flow, capital requirements, staffing or supply chain. Forecasting and then checking actual figures against your projections mean you can respond early and take action that could keep sustainable growth on track.
As your business is growing and the demands on you are increasing, you may need to set aside time to keep track of essential figures and processes so you stay in control and adapt and adjust your plan to meet the changing situation as you grow.
2. Understand your business’s sustainable growth rate
Work out the maximum amount of sales growth you can reach without compromising your cash flow or requiring additional finance. Aligning your growth strategy with your growth capacity and operational capability can identify any areas of financial or operational overreach.
Remember, growing sales doesn’t necessarily translate into increased profits. You need to make sure that you are taking the right cost considerations into account too – for example, higher staffing costs or paying up-front for raw materials.
Investing in processes and systems that can be scaled or automated as your business grows can lead to efficiencies later on. Accounting, cash collection and time-management processes in particular need to be rigorous.
It could make strategic sense to take a short-term hit on a deal that will be profitable in the long term. But before you use that approach, make sure you can weather the dip financially and that the long-term results are assured.
3. Take a careful look at your finances
The financial needs of a steady business are different from those of a growing one. Understanding exactly how your finances are structured in reality can be an eye-opener. If you’re regularly exceeding your overdraft limit, perhaps a loan could offer better terms, saving you money over time. Seasonal businesses may require more flexibility from their finances, and businesses looking to purchase plant, machinery, office equipment or company vehicles may find that leasing, hire purchase or other forms of asset finance could prove more cost-effective than outright purchase.
Before you embark on a growth programme, weigh up the risks of how having the capital to fund growth will balance against taking on too much debt. Work out how you will service your debt in the long term if you face a decline in sales at some point. Make sure the practicalities align with your aspirations.
See more in our guide Financing for growth.
Also see the chapter on Going for Growth in our entrepreneurs’ guide Yes Business Can – download a copy now.
4. Make cash flow a priority
Keep a cash flow forecast and monitor performance rigorously. Growing quickly can result in cash leaving the business faster as costs rise. By putting in place robust systems, you can make sure payments from customers are being received in a timely way so you can steer clear of any cash flow problems.
If you’re struggling to collect what’s owing – whether that’s due to uncooperative customers or lack of admin time – invoice discounting or factoring may be solutions worth considering.
See our guide 9 ways to improve cash flow.
5. Do your research thoroughly
If you’re entering new markets, launching new products or targeting new customers, make sure you analyse available data and thoroughly research long-term growth potential, payment terms and upfront costs. See the strategy section in our guide to growing your business.
6. Keep your eye on profitability
If sales are growing but profits falling, re-considering your pricing strategy may be appropriate, particularly if you heavily discounted to corner market share. Working in a profit percentage for each sale, for example, can ensure margins aren’t eroded.
7. Get the right people on board
Hiring, training and developing the right people can make a big difference to the success of your growth plans. Spending time thinking about and documenting your organisation’s culture and core values gives you a benchmark to assess how potential employees will fit in and retain the culture you want to keep. Working with a trusted recruitment partner who understands your business and its culture can also save you time and money.
You may also want to set up an onboarding programme - particularly if you are growing staff numbers rapidly - to make sure that they understand the company ethos and culture. This can help particularly in customer-service brands so that staff project the right company image and offer the level of service you expect.
People’s roles may grow and change as you scale up. Make sure your leadership team has the right qualities and skills. See the leadership chapter in Yes Business Can.
When hiring you will also want to make sure that in your hurry to take on new employees you are still following all the necessary employment laws.
8. Manage your supply chain
Make sure you take suppliers with you on your growth journey. Communicate your plans to your suppliers to check they can meet increased demand or consider diversifying to bring additional suppliers on board. Planning well here can prevent any operational and reputational damage through an inability to fulfil orders, which could potentially occur if your supply chain isn’t able keep up with the pace of your growth.
9. Don’t forget your existing customers
Retention and customer satisfaction can be a casualty of fast growth. Winning new business is great, but retaining old customers is important to long-term business health. It’s important to listen to their feedback, so you know how to improve things for them and for new customers too.
10. Collaborate to succeed
You don’t have to go it alone. Whether it’s outsourcing non-core activities, formalising partnerships or joining forces to achieve economies of scale, collaboration can help you grow into new markets or secure new customers by acquiring skills, experience or more practical assistance like access to distribution networks or specialist machinery.
Supporting businesses to secure sustainable growth is in everyone’s interests, so asking for help from your bank, accountant or your local business network can provide a real boost and a fresh perspective on your plans and any issues you’re facing.
See the Chapter in Yes Business Can on Critical Friends: How people outside your business are key to entrepreneurial success – download your copy now.
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