What got you here won’t get you there: Planning for prosperous business growth

CMC Network What Got You Here
This entry is part 2 of 3 in the series Pro CFO Basics

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 pains

Growing and owning 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, maybe additional managers. The slower a company grows, the more incremental the changes can seem and, in some ways, the easier the changes can be to manage.

When companies grow too quickly, they can find themselves overwhelmed with outdated, irrelevant, or no longer practical environments, systems and processes.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 consists entirely of two people sitting across the desk from one another. One does order entry, the other purchasing, and that’s it. They’re both aware of the full job and what the 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 make the steps up as they went when there were only two of them?

Now add 50% more customers and three new employees. You can see how quickly this situation can not only feel out of control, but inhibitive to the company’s ability to scale and satisfy customers.

The obvious red flags in this scenario might seem to be the friction experienced when a new employee is 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 have, 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. For example, figuring out ways around outdated software rather than taking the time to assess what’s no longer working, 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 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 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 an impact and how to address them.




Series Navigation<< Mastering the 3 year business planDeveloping better systems and processes to increase satisfaction, efficiency and opportunities >>

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