Prepared by the CFO – How to Grow This Business?
A friend called me and asked, “How do we grow our business…? My boss wants to promote me and the interview, tomorrow, is based on what I will do to grow the business. Help… will a bottle of wine help?”.
The initial approach to answering the question, ‘How do you grow a business?’ should be straightforward. It doesn’t take a Stelios or a Branson to tell you that you need:
- More sales
- More profit
- Better/more people and better processes.
However, as with all these things, the devil is in the detail. Having said that, I will report back the conversation.
First, I needed to shape the conversation to let my friend know that the rest of the evening would revolve around the following questions:
- Where are you now?
- What is your potential to grow the business?
- Where do you want to go?
- How are you going to get there?
- What do you need to do?
And we had to cover all this in one night! So, in at the deep end!
Measure Current Performance
Financial performance is a consequence of marketing and operations performance – that is, selling and making creates the money, so you cannot simply focus on the financial figures!
Estimate scores out of 10 for:
- Financial performance
- Marketing performance
- Operations performance.
Measure The Capability Of The Business Itself, The Potential Of The Business For Future Development
Estimate scores out of 10 for:
- Resources (physical, human, intellectual, financial, technological)
- Experience appropriate to what you think you are trying to do
- Controls and Systems (that give you the information you need to make the best decisions)
- Ideas and Innovation (processes and the way you present your product) and
- Leadership (how clear are you about where and how you are taking the business).
Where Do You Want To Go?
So, where do you want to be in three years’ time (Turnover? Profit? Employees? Product lines? Number of customers?) Because if you know where you want to be in three years time then you know where you want to be in one year’s time. And, if you know where you want to be in one year’s time then you know what you need to do now!
How Are You Going To Get There?
In terms of the thinking, the strategic planning, you need to get really clear about what it is you want the business to become. The following questions enable you to understand how and where you are taking the business in, say, three years’ time:
- What do you want the business to be?
– What is your ‘blue skies’ goal? (Some people refer to this as ‘vision’, but don’t get hung up on all the different words that smart-arsed business consultants use to blind their clients with science!)
- How will you know you are there?
– What are the numbers, the targets for turnover, profit, staff, number and size of clients (AKA [Also Know As] ‘mission’)
- How are you going to do it?
– What’s the ‘strategy’? Are you going to be cheaper, faster, higher quality, employ/steal the best staff, buy out the competition, focus on small contracts or what??
- What are the steps on the way?
– What are the big steps on the journey that you need to do before you can move on? New premises, a financial director, outside funding or what?
- What will you be measuring to assess your performance?
– What things do you need to measure on a day-to-day basis… targets that will mean you are on the way, if you hit them…?
What Do You Need To Do?
You need a system to measure how you are doing; a system that measures the key indicators so that you can focus on the big stuff. We use a ‘business dashboard’ (using a minimum number of core measures) to show how we are doing. Like the dials in the airplane cockpit, you only need to know how high, how fast and how much fuel have you got …all else is commentary!
‘Is That It?’ She Asked
Clearly that was not it. I had told her about some of the things she needed to do; but, what I hadn’t touched on was what had to happen if they hoped to grow the business. So, out with another piece of paper and more scribbles and diagrams to explain some of the more fundamental things that would have to happen if she really wanted to grow the business.
The Nitty Gritty
- At the heart of the business needs to be numbers. Everything should be tested and measured so that you know what works and what doesn’t so that you can systematically think about how you can do things better.
- You need to know how the 80:20 rule works in your business. 80% of profit comes from 20% of customers. Do you know who your best customers are? Where can you find more? And what about your worst customers, the customers from hell, who make you no money and are a pain in the backside? Why do you keep them? What would happen if you sacked 50% of your customers!
- You need to streamline and systemise everything so that you don’t keep making things up as you go along – create a works manual that explains every system. If you can create a system that works in Bristol, then you replicate the system and the same system will work in Liverpool – like a franchise, you must try to create a model that can be cloned – such a business building system involves more focus working on rather than in the business
- Think of the business as a sausage or a money machine. What do you have to put IN to get how much OUT? If $100 of marketing generates $300 of profit then presumably $1,000 of marketing generates $3,000 of profit. Measure, measure, measure…
- Look at every step of your sales funnel and make improvements at every stage…get more leads, get better at converting them, keep customers for longer, get them to buy more and more often and the results are exponential.
- Use more ways of reaching potential customers. Most businesses use two or maybe three of the possible fifteen or so available channels only and ignore the rest. The sales funnel depends on you getting to as many people as you can so consider all avenues: word-of-mouth, networking, advertising, PR, banner ads, referral systems, seminars…
And the list goes on…
The really great businesses are obsessed with three things:-
- Where are we taking this business? (while being aware of the outside environment) (AKA strategy)
- How are we going to sell this stuff? (AKA marketing)
- How can our people get on better? (AKA teams and people)
More importantly, and this is the big issue for the owners, have they got the bottle to overcome some ‘founder fears’? It is often the founders themselves that hold back the growth of their business because they are:
- Frightened of letting go of financial control – sharing ownership with others, taking external funds to fund and fuel the growth
- Frightened of letting go of management control – sharing power with others (AKA delegation)
To grow a business, the owners need to recognise that they cannot do it all themselves, and that they will probably need some more money (because growing a business is like haemorrhaging cash).
A To Do List For The Owners
- Follow up on all leads
- Create a list of back-end products – other complimentary things to sell to existing customers
- Check every step of the customer journey – how can you make it better for them?
- Check every step of the sales funnel – how can you improve the results that you get as potential customers head towards being customers?
- Systemise, Measure and test everything
- Create a one-minute logo, an elevator pitch – focus on who you work with, and what their problem is, how you can sort it out for them, and what the benefit is to them .
After all, why should people bother to buy from you if you are the same as the competition?
Some Crunch Questions And Final One-Liners
- Is this a good industry to be in?
- What do your customers think of you?
- What do you do differently from other businesses?
- Stop procrastinating – and do it now! You don’t get your great ideas sitting at your desk
- Don’t shy away from passion
- Decide your goals, and be prepared to pay the price for achieving them.