This is the first article of business advisor Phil Symchych’s new four-part series on business growth.
Are you a small business with the goal of growing annual revenues beyond ten million dollars? Are you a mid-sized company that is still flying by the seat of its pants? Do you want to increase profits during these inflationary times? If any of these statements are true, this series of articles can help.
First, a definition. Industry Canada defines a small business as a company with less than 100 employees. In the United States, the Small Business Administration defines small business based on the number of employees and/or annual revenues—and by industry—very complex.
For simplicity, let’s use the annual revenue number of ten million dollars to define the ceiling for a small business and the floor for a mid-market company. Feel free to pick your own number.
It doesn’t matter what your revenues are now, it only matters where you want to go.
Small businesses often start as lifestyle businesses—the entrepreneur has a skill or idea and wants the freedom to run their own show. As sales increase, suddenly the technical entrepreneur is running a business. There are employees, customers, suppliers, bankers, accountants, and other demands on their time and attention.
This is the critical point. Either the entrepreneur gets serious and professionalizes management, or they keep winging it, and working harder.
Your technical expertise does not automatically translate into management expertise, as many of us have learned the hard way.
In fact, what I’m sharing in this article I’ve learned the hard way. This advice is based on my three decades of consulting to 63 industry segments. I’ve helped B2B companies grow annual revenues by ten million dollars in one year and triple their profits. The process of building a profitable mid-market company includes these four critical stages.
Creating and strengthening your professional management team is the foundation for future growth. You are only as good as your people.
Do your people have experience at the levels you aspire to in the future? Are you a twenty-million-dollar company wanting to grow to one-hundred million in annual revenues?
If no one on your management team has experience working for a larger company than yours, it’s going to be a bumpy ride. Trial and error is a great teacher; effective, but inefficient and expensive.
A true management team, like a sports team, wins and loses together. As companies grow, silos can develop. It’s the CEO’s job to prevent silos and keep your managers working as a team.
When you have a functional management team, it’s time to focus on enhancing customer value. You need to understand how you create results for your customers. This is not just about what you do; it’s about the value and results you generate.
Results look like increasing revenues, decreasing expenses, increasing profit, improving operating efficiency, extending asset life, increasing throughput, improving productivity and profit per labor hour. These are measurable results.
Let me ask you a serious question: what measurable results do you create for your customers?
Answering this question leads us to the next important topic: messaging. Does your messaging talk about how great you are and how many locations you have? Or does your messaging identify your top customers’ most common goals or challenges and the results you can help them achieve?
In all my years of consulting, the second biggest weakness I see, after not enough bench strength in management, is a weak or non-existent message about the results a company creates for its customers.
Research shows that B2B buyers are 70 per cent convinced to do business with you before they even call you to discuss placing an order. What messaging is on your website and social media to help prospects make favorable assessments of your company?
When you’ve got your team in place, are focused on customer value, and your messaging reflects results, it’s time to ruthlessly focus on the metrics in your business.
If you’re running your business by only looking at your financial statements at month end, you’re missing the most critical metrics in your business. The financials are not a team metric, they are a dollar measurement, and a lagging indicator of what happened, prepared according to accounting definitions. They are useful, yes, but do not tell the whole story.
The most critical metrics can be measured daily and should be analyzed at least weekly by the management team in a group meeting. Yes, the process is a little clumsy at first, but once your team gets traction, look out.
Sales orders, and not just the pipeline of probability, but actual orders.
Actual production volumes. Now you can divide your sales by production to determine your production backlog.
Cash position and cash flows, in and out.
When you and your management team can discuss these three metrics on a weekly basis, and work together to improve them, you will grow your business and your profits.
Full speed ahead!