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    4 Roadblocks to Small Business Growth and How to Overcome Them

    Posted by Sylvia Lagerquist, CPA

    4 Roadblocks to Small Business Growth and How to Overcome Them

    Most small business owners have a desire to grow their company to the next level. The challenge for small businesses who “stay small” is that even the smallest loss of customer accounts or deals could create an earthquake effect on the company’s revenues.

    That having been said, no one said growth would come easily. In fact, there are some extraordinary roadblocks that need to be overcome if you’re going to grow successfully. Here are five of them, and strategies for addressing each successfully:

    Roadblock #1: The Owner’s Time

    In a small business, almost without exception the first roadblock to growth is the time the owner has (or doesn’t have) to focus on it. In a business-to-business (B2B) company, this may be due to the fact that the owner herself or himself has historically been the chief sales officer, and is now buried in work and operational issues. Since no one else can replace the owner, now we’re facing a seemingly insurmountable roadblock.

    The most common solution is often for the owner to hire a sales person and then leave that person to ‘figure it out’, which means that if the owner is an effective sales person the new hire is almost guaranteed to fall short and if the owner is not a very strong sales person there is no model of success for the new hire to look toward.

    In short, randomly hiring and ‘dropping in’ a sales person is the most ineffective approach of all. Instead, take two key steps. First, you must carve out a certain small but consistent portion of the owner’s time for sales and business development. This can be as little as 10-20% but it must be consistent — often best achieved by blocking out certain days of the week or certain times of day for this activity. And second, you need to rigorously document what it is that makes for an ideal customer. The patterns may not be obvious so you may need to ask existing accounts what attracted them and why they stay. That’s okay — these people like your business and continue to buy from you, so they are the perfect resource to help you understand what truly matters.

    Once these two steps are made, now you can consider adding sales resources because they will have consistent time to learn from the owner and transition key relationships, while also having a workable sales roadmap from which to draw. Those are some powerful ingredients for success.

    Roadblock #2: The Resource Plateau

    Another roadblock to growth is the resource plateau, in which the company’s owner recognizes that adding ‘too many’ new customers could end up triggering a major increase in operating costs. For a product business, this point might arrive when production has to add a second shift on the shop floor or rent additional warehouse space to hold inventory. For a service business, it may be the point at which key internal service delivery resources (such as senior accountants in a CPA firm or certified experts in an IT firm) are tapped out and you will need to make a group of hires (and then make sure they have desks, phones, computers, etc.).

    This roadblock is so challenging that it’s often nearly impossible for owners to see past it, especially since they know that adding these resources not only costs money but could also bury them in more operations and management work.

    What is important to understand is that this roadblock is real, but the problems associated with it are largely imagined. The key to overcoming it is twofold. First, you need to prepare for growth and that means streamlining and organizing your operations. Invest in key software and systems to help you better manage workflow, account management, operations and production. Then, build training and employee on-boarding processes that support these. Your goal here is to get the company ready to scale before a single dollar is spent on new people. Finally, look at your existing staff and work to optimize their work around what is a ‘best fit’ for each client or project type.

    Now, you need to think about that plateau and how you can blast through it. See, the ‘danger zone’ is only in the front end of the plateau, where you’ve had to add resources that aren’t entirely filled up with work. So perhaps you had to add two or three additional staff but they support work that’s less than what the last three fully built-out resources do.

    The key is to make those resources fill efficiently with work, and that’s why we have to go back to the first roadblock and build a sales process that can be staffed by other personnel over time (and not just rely on the owner). This, in turn, allows us to invest in growth infrastructure with confidence because we know that within a given period of time, we’ll be through the plateau and over on the other side, where scalability leads to profitability.

    Roadblock #3: Distractions Galore

    The next challenge is one that a small business faces at any size, but that becomes almost deadly to new growth efforts. And that challenge is the distraction of other priorities. Small businesses often hire staff to perform multiple simultaneous functions — such as an office manager who will also be a billing and customer account manager…and also provide marketing support. What often happens is that one or two of the listed functions (usually the proactive ones) rapidly disappear due to the time and demands of the other, more reactive ones.

    The key solution to this is outsourcing, because it allows you to gain access to fractional personnel (much in the same way you would do with that multi-role internal hire), but each fraction is dedicated exactly as intended.

    Put another way, for a small premium you are able to retain two or three different resources to help you focus on each of the key components of growth — such as marketing, sales support, CRM administration, appointment setting, etc. The same model has been used for years by small businesses when facing legal, accounting or technology needs. Harnessing that same model for growth support is an ideal model for lasting success.

    Since the external resource has a dedicated scope of work and little to no risk of being subsumed by internal issues, this protects your investment over the long term and enables a level of consistency that is almost unheard of in small businesses otherwise.

    Roadblock #4: Unclear Growth Focus

    The fourth and final challenge is a lack of clear focus on why, how and where to grow the company. After all, not every small business owner has a very defined picture of the purpose behind further growth. Can’t we just stay at the plateau we currently find ourselves in, and not ‘rock the boat’ with new investments and initiatives?

    That could be the case, but usually it’s not. Small business owners often dramatically overestimate the potential sale value of their company (especially in professional services, where even a sale price of 1x annual revenues is far from assured). In addition, they tend to become comfortable with a lifestyle that the business supports, but underestimate the risks associated with that lifestyle should the business experience account losses.

    For example, a B2B company might be facing a pending loss of customers as the owners of their own client companies age out and retire en masse. Or a small business might be unprepared for a significant portion of their offering to become commoditized by new entrants (such as cloud-based providers of services that used to be sold exclusively in person).

    The other issue here is that the owner needs to know why they own the business in the first place. A business is not a job, it’s an entity of its own and its success relies on a strategy and direction for ongoing stability to be achieved.

    The two most effective pathways around this roadblock are business assessment and opportunity analysis.

    First, you need to perform a realistic assessment of the value and strength of the company today, both as a saleable asset and in terms of its ability to be resilient in the face of a changing marketplace. This will at least ground the owner in a fact-based framework for decision-making.

    Second, with the facts from the first step in-hand, it’s time to look toward the greatest opportunities for growth and opportunity, especially in light of how the marketplace may be shifting over time. If your small business is a specialty retailer that relies on foot traffic, for example, you might face a question of what direction to head in: Do you invest aggressively in an online sales effort to reach more customers, or do you double-down on retail but narrow your focus and perhaps invest in tourism marketing to bring more highly focused customers into your store?

    The point is to connect the two dots: Where we are at realistically today, and where we might find the best opportunities for growth and success tomorrow.

    What these four roadblocks all have in common is their ability to literally freeze the business in place, and paralyze the owner as she or he struggles to press forward in the face of significant headwinds. By identifying these roadblocks early on and mastering the solutions for each one, you’ll be far better positioned to achieve and sustain growth that can take your business well into the future with a healthier bottom line and a stronger asset value as an enterprise for future sale as well.


    Image Credit: Simon Blackley (Flickr @ Creative Commons)

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