Business start up and growing businesses face a range of challenges. As a business grows, different problems and opportunities demand different solutions, what worked a year ago might now be not the best approach. All too often, avoidable mistakes turn what could have been a great business into an also-ran.
Recognizing and overcoming the common challenges of business start up and growing businesses is essential if you want your business to continue to grow and thrive. Crucially, you need to ensure that the steps you take today don’t themselves create additional problems for the future. Effective leadership will help you make the most of the opportunities, creating sustainable growth for the future.
It is undoubted that growth is the goal of every business owner. But what many entrepreneurs fail to take into account is the need to build systems and have the right people in place to help clear the many hurdles that emerge as a company expands from a few people to dozens, to hundreds or even thousands. And if that expansion process plays out too quickly, it can spell operational doom for even the savviest entrepreneurs.
Challenges of Business Start up and Growing Businesses
Startups are usually faced with monopolistic businesses that have dominated the market, making it difficult for newcomers to emerge and and the countless startups that are launched regularly in the market having innovative ideas. However, this guide highlights the particular risks, mistakes and challenges of business start up that most commonly affect growing businesses and the solution to these challenges. They includes:
- Ability to Keep up with the Market Trend
- Ability to Provide Useful Insights
- Ability to Adopt New Strategies
- Cash flow and financial management
- Businesses Problem Solving
- The right systems
- Skills and attitudes
- Accepting Change
1. Ability to Keep up with the Market Trend
Ability to keep up with the market trend is one of the common challenges of business start up and the growing businesses. This is because market research isn’t something you do as a one-off when you launch your business. Business conditions change continually, so your market research should be continuous as well. Otherwise you run the risk of making business decisions based on out-of-date information, which can lead to business failure.
The more you succeed, the more competitors notice and react to what you are doing. A market leading offer one day may be no better than average a few months later.
Apparently loyal customers can be quick to find alternative suppliers who provide a better deal. As products (and services) age, sales growth and profit margins get squeezed. Understanding where your products are in their lifecycles can help you work out how to maximize overall profitability. At the same time, you need to invest in innovation to build a stream of new, profitable products to market.
2. Ability to Provide Useful Insights
Ability to provide useful insights into market conditions and trends. As a growing business, your own experience can be even more valuable. You should be able to build up an in-depth picture of what customers want at all time, how they behave and which of your marketing approaches work best.
Taking the time to talk to key customers pays off. You should encourage your employees to share what they know about customers and the market. Effective IT systems can also make it easier to share and analyze key information such as customers’ purchasing behavior and preferences. You may want to carry out extra research as well for example, to test customer reaction to a new product.
3. Ability to Adopt New Strategies
The plan that made sense for you a year ago isn’t necessarily right for you now. Ability to adopt new strategies are common challenges of business start up and the growing businesses entrepreneurs face. This is because market conditions continually change, so you need to revisit and update your business plan regularly.
As your business grows, your strategy needs to evolve to suit your changed circumstances. For example, your focus is likely to change from winning new customers to building profitable relationships and maximizing growth with existing customers. Existing business relationships often have greater potential for profit and can also provide reliable cash flow. Newer relationships may increase turnover, but the profit margins may be lower, which may not be sustainable.
4. Cash Flow and Financial Management
Good cash flow control is important for any business. For a business start up and the growing business, it’s crucial cash constraints can be the biggest factor limiting growth and overtrading can be fatal. Making the best use of your finances should be a key element in business planning and assessing new opportunities. With limited resources, you may need to pass up promising opportunities if pursuing them would mean starving your core business of essential funding.
Every element of working capital should be carefully controlled to maximize your free cash flow. Effective credit management and tight control of overdue debts are essential. You may also want to consider raising financing against trade debts. Good stock control and effective supplier management tend to become increasingly important as businesses grow. Holdings of obsolete stock may become a problem that needs periodic clearing up. You may want to work with suppliers to reduce delivery cycles, or switch to suppliers and systems that can handle just-in-time delivery.
Planning ahead helps you anticipate your financing needs and arrange suitable funding. For many growing businesses, a key decision is whether to bring in outside investors to provide the equity needed to underpin further expansion.
5. Businesses Problem Solving
New businesses often run in perpetual crisis mode. Every day brings new challenges that urgently need resolving and management spends most of their time troubleshooting. As your business grows, this approach simply doesn’t work. While a short term crisis is always urgent, it may not matter nearly as much as other things you could be doing. Spending your time soothing an irritated customer might help protect that one relationship but focusing instead on recruiting the right salesperson could lay the foundations of substantial new sales for years to come.
As your business grows, you also need to be alert to new problems and priorities. For example, your business might be increasingly at risk unless you take steps to ensure your intellectual property is properly protected. If you are focusing on individual marketing campaigns, you might need to devote more resources to developing your brand. Identifying the key drivers of growth is a good way of understanding what to priorities.
A disciplined approach to management focuses on leading employees, developing your management team and building your business strategy. Instead of treating each problem as a one-off, you develop systems and structures that make it easier to handle in the future.
6. The Right Systems
All businesses produce and rely on large volumes of information, financial records, interactions with customers and other business contacts, employee details, regulatory requirements and so on. It’s too much to keep track of – let alone use effectively – without the right systems. Responsibilities and tasks can be delegated as your business grows, but without solid management information systems you cannot manage effectively. The larger your business grows, the harder it is to ensure that information is shared and different functions work together effectively. Putting the right infrastructure in place is an essential part of helping your business to grow.
Documentation, policies and procedures also become increasingly important. The informality that might work with one or two employees and a handful of customers simply isn’t practical in a growing business. You need proper contracts, clear terms and conditions, effective employment procedures and so on. Many growing businesses find using established management standards one of the most effective ways of introducing best practice. Quality control systems can be an important part of driving improvements and convincing larger customers that you can be relied on.
Investing in the right systems is an investment that will pay off both short and long term. You benefit every day from more effective operations. If you ever decide to sell the business, demonstrating that you have well-run, efficient systems will be an important part of proving its value.
7. Skills and Attitudes
Entrepreneurs are the driving force behind creating and growing new businesses. All too often, they are also the people holding them back. The abilities that can help you launch a business are not the same as those you need to help it grow. It’s vital not to fool yourself into valuing your own abilities too highly. The chances are that you’ll need training to learn the skills and attitudes required by someone who is leading growth.
To grow your business, you need to learn to delegate properly, trusting your management team and giving up day-to-day control of every detail. It’s all too easy to stifle creativity and motivation with excessive interference. As the business becomes more complex, you also need to develop your time management skills and learn to focus on what’s really important.
As your business grows, you may need to bring in outsiders to help. You’ll want to delegate responsibility for particular areas to different specialists, or appoint a non-executive director or two to strengthen your board. As you start tackling a new opportunity, someone who has experience of that activity can be vital.
For many successful entrepreneurs, learning to listen to and take advice is one of the hardest challenges they face. But it may also be essential if you are going to make the most of your opportunities. Some entrepreneurs, recognizing their own limitations, even appoint someone else to act as managing director or chairman.
8. Accepting Change
Complacency can be a major threat to a growing business. Assuming that you will continue to be successful simply because you have been in the past is very unwise. Regularly revisiting and updating your business plan can help remind you of the changing market conditions and the need to respond to them. See the page in this guide on planning ahead. An up-to-date plan helps you identify what action you need to take to change your business and the way it operates, for example:
- Changing to suppliers who can grow with you and meet your new priorities. As your business grows, consistent quality and reliability may be more important than simply getting the cheapest offer.
- Renegotiating contracts to take account of increased volume.
- Training and developing employees. Your own role will also evolve as the business grows.
- Making sure that you keep up to date with new technologies.
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