Growth in the current climate is no mean feat, but given the right mindset and approach, there are still plenty of opportunities to be had, particularly for those businesses operating in sectors that have remained relatively robust throughout the economic cycle.
If you’re at the start of your growth journey, how do you ensure that your strategy is fit for purpose? And what are the key ingredients you need to making sure it’s a success?
Roadmap
Having a clear and compelling roadmap to scale a business is a vital part of achieving growth ambitions. The plan can be far-reaching, but it must also be realistic. Revenues will never grow in isolation. With growth comes increased overheads and businesses need to factor this into any growth strategy.
Team
Being ambitious and having an exciting growth plan is one thing, but companies need to ensure they have the people in place who have the skills needed to turn ambitions into reality.
It’s important that the management team is a strong working unit made up of complementary skillsets that work in tandem with one another – an ambitious CEO who is tempered by a CFO who brings a dose of practical realism is a perfect combination for a business with a clear set of objectives. Knowing a business’ strengths and weaknesses is also a crucial part of success. Don’t work in isolation; be open and willing to receive input from external parties to help improve the business.
Success not only rests on the shoulders of the senior team, but also in the wider workforce. Retaining the brightest minds is an ongoing challenge – one that goes beyond salaries and fancy perks. Creating a culture of collaboration, accountability and ownership, as well as ambition at all levels, can help to breed success – particularly if it’s married with the right level of support and training. If a business is merely paying lip service to these elements, it will be evident in staff turnover rates and business performance.
Getting the fundamentals right
The key is to do what you do extremely well – whether it’s run of the mill, or breaking boundaries. That means having streamlined and effective operations, with a focus on the basics that customers expect, but which many businesses fail to deliver. For example, focusing on high quality products, reasonable lead times, and superb customer service.
Market potential
The market a business operates in doesn’t have to be enormous, but it does need to be big enough to allow the company to reach its goals without having to own the entire market. If a business is able to physically open up in other geographies, then that will naturally open up the market and create opportunities. If a business believes that international growth is part of its plan, it needs to be able to demonstrate how it will plug into new territories and what the supply chain set up will look like.
In our experience, one of the main drivers of value in a business is scalability, and to scale well, you need an addressable market. As a rule of thumb, a new entrant will do well to capture 5% of its total market in five years. As such, it’s important to be realistic with assumptions; research the regions and factor in any extra operating costs.
Loyal customers
A successful business is one that attracts sticky customers who come back again and again, generating repeat revenue at good margins. When it comes to consumer-facing businesses, to measure a company’s performance we estimate the average lifetime value of each customer and divide it by what it costs to acquire that customer. This metric is one of the most important indicators for a business of that kind.
Commercial edge
To really grow in a competitive marketplace, businesses need to possess hard-nosed commercial acumen. How well are customers and competitors understood? Do the financials stack up? What are the key performance indicators? Innovation and ambition need to be underpinned by good old-fashioned commercial sense and financial planning.
What’s more, it’s essential that a good management team has a firm grasp of the business model, plans ahead for potential cost increases and other difficulties, and still delivers the right level of profit. A business that consistently delivers a gross margin of between 20-30% is well-managed and clearly knows what it is doing, especially in a turbulent market, or over a sustained period.
Good data
It’s crucial when a business is putting together a growth strategy and successfully executing one, that it gathers accurate insights about the business’ performance and customers, so it can easily identify and respond to any problems before they escalate. The best run businesses will have embedded systems and reporting tools that allow management to view data in real time. Becoming a data-rich business that has robust information at its fingertips ensures the team can maximise profitability and meet growth ambitions for the benefit of all stakeholders.
