Over the next 6 weeks, I will be going over the top 5 reasons why companies are not successful, according to the Small Business Administration of the United States. You will see that there are some common elements to each of the 6. Feel free to look at the original article here.
When someone starts a new full time business venture, in general, they want that venture to earn enough for them to live a comfortable life. When you start from nothing, and you want it to develop into something, growth is needed.
I have seen and heard a number of stats in regards to business and the need for growth. Some people say that if your company is not growing, it is dying. That would have to come with certain parameters. For example, there are not many companies that grow during a recession or an economic depression. The second interesting statement I have heard is that if a company has the same revenue level over a 2 year period, there is an 85% chance that the company will not exist 5 years from now. In other words, your company needs to be able to constantly grow to be able to survive and thrive into the future.
As you can tell, growth is a very important part of a business. Sadly, it is also considered to be the 6th most common reason why a company fails. You might be thinking now, how could a company fail that is growing? Very easily, there is no proper plan or research conducted.
Plan: What is the strategic plan with the new product or service? Who are your competitors? How are you going to differentiate your offering from others that are currently in the market? What is your budget and timeline for future viability of the product?
Research: With a new product or service that you are offering, are you actually fulfilling a market demand? What problem are you solving for the consumer? One reason why growth hurts company because no research is done in terms of the product or service they are offering and the target market. Asking your loved ones or friends does not constitute research.
Resources: Do you have the internal resources to be able to expand with a new product or service? Do you have to hire extra people? What will their skill set be like? How much will it costs to hire those people? Can your business model handle those costs? Do you have the internal capacity to make or deliver the product? Is a capital investment required?
I personally know a local Edmonton firm that underwent a parabolic growth profile. Sadly, their growth was not properly managed. Currently, this firm is letting go staff because their customers, new and old, became very displeased with the services they received. The decrease in revenue is not economically driven. They deliver an essential service and their customers are now spending their dollars with their competitors.
Have you seen growth backfire on a firm? How was it handled?
Have an awesome week.
Kevin MacDonald is a Business Consultant at L6S Business Consulting Inc (www.L6SBC.ca). L6S offers services in management consulting, Controller and CFO contracting, and lean management with either project work or teaching/mentoring of staff. Kevin has his CMA accounting designation along with a Black Belt in Lean Six Sigma.
Kevin is active in the community by volunteering for different groups and donates platelets at the Canadian Blood Services clinic on a bi-weekly basis.
For help with your business, contact Kevin at kevin@L6SBC.ca or 780-868-1867