A vast amount of support material is provided to entrepreneurs who are starting a new business or for those companies that are subject to laws and regulations that require them to implement systems and processes to formalise the governance process. However, for most business leaders the issue for them is not how to start the business or even how to comply with governance codes, but simply how do they ensure their business survives?
For many, their business looks very different from what it did during the start-up phase. It may have more employees, operate out of more than one premises or even carry out business in more than one country. In all of these cases, the management’s approach to the business must develop in line with the expansion if they want to maintain business sustainability.
Fortunately, there are signs that tell you if this is not happening. First, the leader will be working very long hours “fire-fighting” day-to-day issues; second, the business will be performing erratically, evidenced by numerous minor mistakes causing frustration in the workforce; and third, the financial results will not meet expectations with cash flow, profit levels or top line revenues seemingly stuck at a level or in very slow decline.
If your organisation is plagued with one or more of the above issues, here are some thoughts as to how that will affect your business.
If the leader is spending all their time on day-to-day issues, they are not looking forward and planning for the future. As a result, the business is stuck. An organisation where the leader is not actively planning for the future is likely to be on a path of slow decline.
Often, especially if the business has grown quickly, there will be inconsistencies in the way a product or service is delivered to the customer or client. These incidents are usually put down to staff errors. However, more often than not, they will be a direct result of misunderstandings about individual roles and what is expected of them. As a result, service levels suffer leading to reduced confidence and floundering trading activities.
It can be difficult to interpret financial results, mostly because the changes are quite small and the focus is erroneously on carrying out the bookkeeping tasks of a financial accountant rather than using the financial planning skill of a management accountant. Businesses, where cash flow has become an issue or bottom line profits and/or revenues are static or growing slower than anticipated, should recognise what those warning bells say about the health of the business.
Why are these scenarios so common, even though they apparently need just a degree of common sense rather than the development of a particular skill? One reason can be that as businesses grow, they develop a lot of different products and services. Some will be more successful than others; some will be more profitable than others. If a business doesn’t understand these dynamics, then it might spend considerable efforts on activities that are not particularly beneficial to the financial health of the organisation.
Businesses, where cash flow has become an issue or bottom line profits and/or revenues are static or growing slower than anticipated, should identify the warning bells for the deteriorating health of the business.
If an organisation faces any or all of these issues, the following five suggestions can help them in the process of creating a sustainable environment.
- A business’ success depends on its employees. It is very unlikely that one or even two people, however talented, can achieve a sustainable business beyond the start-up phase. The action point here is to review the tasks of each staff member and ensure their tasks and objectives are relevant for the purpose.
- Communicate your vision for success. If a business has clear objectives, it will be easier to design a plan for effective implementation. If the vision is locked away in the mind of the leader, it will most certainly result lead to employees interpreting the vision in their own way that can materially affect the performance of the business. So make sure that all employees understand your vision and are part of the success story.
- Understand your market and provide a product or service that someone would want to buy from you. As businesses grow, it is tempting to deviate to other forms of services. However, an SME has one major advantage over a large business; it is minutely attentive to its customers or clients’ each and every need. If that service is spread too thinly, it will not have the required effect. It is important to revisit the target market and review the unique selling proposition to service it.
- Understand your business. This might seem a bit strange but it is amazing how many businesses do not recognize that changes have taken place in their organisation as a result of its growth. It is important to review your products and services, so the financial contributions of each are understood thereby allowing for a greater focus on the stagnant areas.
- Determine a core team with individuals who have the skills to take on particular tasks, thus allowing the leader to concentrate on the company’s future. The action point is to identify if the potential lies within your existing team or you need to bring in outside talent, either on a full-time or on a project-by-project basis.
This work focuses on creating an organisation that is fit for purpose. Many entrepreneurs fear creating such an organisation because they believe they will lose control of their business. The reality is that a business is unlikely to move forward if it doesn’t embrace the need for such a development. Done correctly, it will, in fact, increase the ability to control the direction of the business. For many, not establishing a formal organisation is the right decision, but for those with a desire to achieve broadening targets, it is critical to the success of their vision.