Business growth is a little like how athletes move through competitive levels. Professional athletes talk about how games change as players move from amateur to college to professional levels. It’s not just skills development that’s needed, but an ability to manage advanced competition, faster or more aggressive situations, new challenges and changing dynamics. It’s a good analogy for business leaders except for one important aspect: Growth in business can creep up on you. If you aren’t prepared for it, you’ll find yourself stuck in the processes that worked well when you were much smaller, had a smaller employee count, or were in a less competitive station.
Growing and having a $10 million company is very different from developing a $15 million or $20 million company. Think about it – a $15 million company has 50% more to manage than a $10 million company. 50% more paper or infrastructure for processing orders, probably considerably more customers and employees, probably additional managers. The slower a company grows, the more incremental the changes can seem, and in some ways the easier they can be to manage. When companies grow quickly, they can quickly find themselves overwhelmed with outdated, irrelevant, or no longer practical environments, systems and processes.
Knowing the Warning Signs of Business Growth
Imagine a young company that has an ordering process that entirely consists of two people sitting across the desk from one another. One does order entry, the other purchasing, and that’s it. They’re both pretty aware of the full job and what each other is doing, and the processes are pretty simple. As the company grows a third person comes into the mix. How does that person learn the job? By observing the other two? Is there a predictable process, or was it easy to just make it up as they went when there were only two of them? Now add 50% more customers and 3 new employees. You can see how quickly this situation can not only feel out of control, but inhibiting to the company’s ability to scale and satisfy customers.
The obvious flashing red lights in this scenario might seem to be the friction experienced when one new employee was added. In fact it was before that, when there were just two people who internally understood the tasks but felt no need to put them into a predictable, structured process. It was too late to deal with this efficiently once a new employee was added – now they have to not only train the new person, they have to understand how to train them and what they’re even training them on.
Preparing for growth means having a culture of optimization, constantly looking for gaps and inefficiencies. Planning for growth involves looking ahead to the company you want and intend to be and incrementally developing towards that goal proactively.
Planning With Purpose
A big culprit of companies struggling under growth is everybody in the company focusing on the day to day. Jobs and tasks are important and consuming, and there’s a willingness to find ways to overcome growth challenges rather than address them. We’ll figure out ways around outdated software, for instance, rather than take the time to assess what’s no longer working for us, why, and what should be done differently.
It’s important for senior management to regularly stand back from the day to day and assess: where are we? Where have we come from, and really, where do we want to go? These are the first steps to formalizing a planning process like a formal three year strategic plan, a one year profit plan, or just budgeting for the next few quarters.
A key strategic component of this kind of assessment and ultimately action is your CFO, who is uniquely positioned to see all aspects of an organization. The CFO can develop the key performance indicators that help an organization better understand its growth trajectory so it can be better prepared for growth. Additionally, the CFO can analyze internal trends that show where inefficiencies are likely to create impact and can be a powerful resource to addressing them.