Running a small company can be hard. Entrepreneurs are often so busy managing day-to-day operations that it can be difficult for them to allocate time for growing the business.
It isn’t only a lack of time that holds them back. There are other hurdles, as well. This post will identify nine factors that could prevent company owners from scaling their businesses and taking them to the next level.
1. Delegate more
Many business owners like to keep direct control over every aspect of operations. Each expense is required to be approved by them. People within the organization have very little real authority. While this management style could work in a small organization, it is likely to hold back a company’s growth.
Why do some business owners display these traits? What prevents them from delegating tasks to people within the company?
The problem is that some entrepreneurs believe that the personal qualities and attributes that helped them start the venture and make it succeed will also work equally well as the company grows. Nothing could be further from the truth. Centralized decision-making can hinder growth. If people have to ask the owner’s permission for every little thing, how will they be able to function effectively?
It’s essential for entrepreneurs who want to grow their businesses to delegate authority. But the process of delegation has to be handled carefully.
In an article titled Why Aren’t You Delegating? in Harvard Business Review, contributing editor Amy Gallo provides some guidelines. She says that some managers think that it’s far easier to complete a task themselves than to take the time and trouble to explain it to someone else. It’s crucial to change this mindset. Entrepreneurs have to learn to move from “I’ll do everything myself” to “I want my people to learn and gain the confidence to make decisions.”
Here’s a quick list of dos and don’ts to make the delegation drive a success:
- Let the team know the priorities.
- Set clear goals.
- Establish a system for reporting progress.
- Provide the necessary training.
- Micromanagement can defeat the purpose of delegation.
- Lack of communication can lead to the wrong outcomes.
- Don’t expect the task to be completed in an unreasonably short period.
- Don’t underestimate the team’s abilities.
2. Renew the focus on marketing
When a company achieves a certain level of sales, the attention that it pays to its marketing activities may decline. Why would that happen? Complacency may set in. The company owner may be satisfied with the current sales volumes. In some firms, marketing could start getting a lower priority. Other tasks could take precedence.
However, this is a short-sighted approach. It’s essential to maintain visibility with both existing and prospective customers. It’s hard to tell when the market may change. If a new competitor offers lower prices or a superior product, clients who have been loyal for years may decide to shift their business elsewhere. If a firm begins its marketing efforts after this happens, it could be months before the results are seen.
What can small business owners do to market their products or services more effectively? One critical issue that must be addressed is the company’s website. In today’s connected world, practically every prospective customer is going to go online before making a buying decision. A poorly designed website or one that doesn’t contain the relevant information can put a business at a significant disadvantage. It’s essential to spend time and effort in developing an online presence.
Another factor that could give sales a boost and enhance a company’s reputation as well, is word-of-mouth advertising. Don’t underestimate its power. It’s free and highly effective. If a client hears good things about a company from a friend, it can have a far greater effect than paid advertising.
3. Don’t ignore existing customers
It’s widely acknowledged that retaining an existing client costs far less than acquiring a new customer. Think about it. The person has already bought and used the company’s product or service and is happy with it. There’s no need to make multiple sales calls or provide demos to different departments in the buyer’s organization. All that is required is for the seller to maintain a top-of-mind presence in the purchasing company.
There is also another benefit that comes with a higher degree of client retention. Fred Reichheld of management consulting firm Bain & Company says that in some firms, a 5% increase in customer retention can provide more than a 25% boost to profits.
What is the best way to make a client a repeat buyer? Special offers and discounts could help. Providing incentives to make additional purchases also offers an opportunity to convert one-time clients into loyal customers. Think about the rewards points and miles that hotels and airlines offer. Loyalty programs based on these principles could work in other industries too.
4. Use technology intelligently
Some small business owners are averse to using new technology. They think that if something worked well enough ten, 15, or 20 years ago, why should it need to be changed? However, the truth is that once new technology or an automated solution is adopted, it’s hard to imagine working without it. Think about functioning without smartphones or email. It’s practically impossible to work without them today.
In the same way, several tech tools could become indispensable for small business owners who start using them. Here are a few that have high utility.
- QuickBooks – this is an accounting software package specially designed for small firms. It’s intuitive and easy to use. A company that isn’t using QuickBooks or any one of the other accounting software packages in the market should consider trying it out. The company provides a 30-day free trial period, so there isn’t a risk of paying for something that you won’t use.
- Zoom video conferencing – a business can use this free video conferencing tool to hold and record virtual meetings. It cuts down on traveling costs and communication expenses. Some of its features can be particularly useful. For example, it offers searchable transcripts and a ten-year archive.
- Mailchimp – this is an email marketing tool that can help businesses contact customers and prospective clients. There’s a free version, as well.
There are hundreds of other online tools that could help a small business. Many offer a “freemium” option – the basic services are free, and they charge only if the user upgrades to the paid version.
5. Monitor the competition closely
One of the best strategies to grow a company’s business is to copy the competition. Even better, create a product or a service that is superior to the competition’s. Apple has used this approach to become a trillion-dollar company. Was the iPhone the first smartphone? No, it was the Simon Personal Communicator (SPC), which was launched by IBM in 1994.
Similarly, Apple didn’t make the first personal computer. MITS (Micro Instrumentation and Telemetry Systems) did when it launched the Altair 8800 in 1974.
Remember, the primary focus of any business is to offer customers a superior product or service. It’s possible to do this only by tracking the competition and monitoring their successes and failures.
6. Set stretch targets
What’s a stretch target? It’s a goal that’s seemingly impossible to achieve.
A good example is the stretch target that Southwest Airlines set itself back in 1972. It needed to unload passengers and luggage off the airplane, refuel, clean the interior, and allow the new set of passengers to board within ten minutes. Most airlines took an hour for the entire process.
Did Southwest meet its ambitious goal? For some flights, it didn’t, but it achieved it often enough to get the airline back to profitability.
Setting stretch targets can be an excellent way to maximize sales and improve profitability. But it can also backfire. Companies that punish employees who don’t meet stretch goals are probably doing the wrong thing.
An article titled In search of a better stretch target by Hugues Lavandier, senior partner at management consulting firm McKinsey & Company, points out situations where these targets can be counter-productive. If a goal is set by simply adding a flat percentage to the original target, it can serve to demotivate people. Other red flags include a lack of clarity on how the target will be achieved and a willingness to compromise on quality to meet goals.
7. Understand customers’ needs
The success of a business depends to a large extent on its ability to remain customer-focused. If a firm merely pays lip service to the term, it will alienate itself from its clients.
Which are the ways to improve customer focus? Make a start by establishing a system to keep in touch with clients. Ask questions and listen to the answers they provide. Based on the information that is collected, it may be necessary to make improvements or change the way products and services are sold.
Is there anything else that companies need to do in this sphere? In his book titled Customer Centricity, Wharton marketing professor Peter Fader, points out that being customer friendly is not enough. Companies need to be customer centric as well.
What’s the difference? Firms shouldn’t treat all customers in the same manner. Instead, they should find out which customers provide the most value and provide them with special treatment. Differentiating between clients in this manner can provide firms with more business and higher profits.
8. Launch new products
Some companies can survive and even prosper on the back of a single product. Most aren’t so lucky. It’s necessary for almost every business to develop new product variants and widen the range of products that it offers its customers.
Of course, it’s necessary to ensure that the new product succeeds in the market. That isn’t easy. An article titled Why Great New Products Fail, by Duncan Simester, head of the marketing group at the MIT Sloan School of Management in Cambridge, Massachusetts, points out a depressing fact. It says that a study of 9,000 new launches revealed that only 40% of the products were still being sold three years later.
How can a company increase the chances of its product being a success? Simester has a few pointers:
- Do customers consider the need that the new product will address to be important?
- Is the product different from others in the market?
- How will customers find the product? Are they motivated enough to search for it?
- How will the customer arrive at a decision to buy? Can the company influence this decision?
9. Maintain a cash buffer and monitor costs closely
Cash is king for small businesses. A company could have a month when sales are poor or one in which the profit targets are not met. It’s possible to recover from these. But if a business runs out of cash, its survival could be at stake.
How can a firm ensure that there’s always enough money to allow operations to continue? Every experienced small business owner maintains an emergency cash buffer. This can come in handy when there’s a slowdown in demand. Remember that even if the volume of business declines, it’s still necessary to pay fixed costs. Rent, insurance, payments for utilities, and employee costs will continue even if revenues fall to zero.
Maintaining a cash buffer that can pay for three months’ expenses is advisable. Six is better.
The other critical area that should be monitored is the level of expenses. Review costs every week and carry out a more detailed analysis once a month. Consider adopting zero-based budgeting. This system requires that a firm justify each expense from a “zero base.” This exercise could help firms identify new ways to cut costs.
The bottom line
The key to increasing sales lies in focusing on marketing and never losing sight of the customer’s requirements. Entrepreneurs who can do this while keeping a close watch on the bottom line will increase their chances of taking their companies to the next level.