Why Businesses STOP Growing
To understand why growth slows or stagnates in any business, we first need to look at how a typical business evolves and why the frustration starts to mount as this growth slows. We call this the ‘Growth Roller-Coaster’.
Word is spread by customers and referrers about the great, cost-effective products or services and new business is easily gained. The business quickly expands to a peak at point A, driven by the personalities and skills of its owners.
In an ideal world, two conditions will now be met. Firstly, the directors will recognise that they have reached the pinnacle for a personality-driven business and secondly, the business and financial performance will be at a level that completely satisfies them. In reality, neither is the case.
What happens in the real world is that the owners continue to drive forward. However, with growth problems materialise… Staff and resource levels have been increased to serve the growing customer base, increasing costs and tying up director time.
The owners themselves come under increasing time pressure, being torn between customer, staff and business needs. Falling service levels and rising costs see the growth constricted and dissatisfaction around the business grows in its place.
Have you ever heard yourself or a colleague say, “This was so much easier in the early days!”
Now the owners find themselves at point C. Right now, you are likely to be at some point between A and C.
Reality has dawned and the business is at a crossroads.
Do you remain a personality-driven business and attempt to claw your way back to point A by downsizing, culling customers and laying off staff and try and raise point A to a higher point?
Or, do you undertake the investment (mostly in time and effort) required to move forward and become a systems-based business at point C. I guess as you’re taking this course, it’s highly likely this is what you want to achieve.
Interestingly both types of business can be successful with the right planning and management. But, too many businesses find themselves falling into the trough in between simply because they’ve didn’t consider early enough what their fundamental strategies and goals should be. Instead emphasis is placed on the process functions of the business like, delivering the product or service and support to customers and essential marketing and management of the business is overlooked. Growth, consequently, is limited.
Let’s look then at the high-level view of your business (which can be any business). As I mentioned earlier, it has three key components…
1. Process: The mechanics by which any business ‘produces’ its saleable products or services. This is how you generate income.2. Marketing: The generation of new customers, the retention of existing customers and the maximisation of customer value. This is how you acquire and retain customers and this course focuses on this particular component.3. Management: The running of the business – its performance management, strategies and goals as well as the financial management of your business (where we come in!). This is where you generate profit and wealth.
When a business is growing steadily and reaching the owner-managers’ objectives, the 3 functions work together to create a harmonious cycle (see diagram on right). In reality, the majority of people in business are taught process skills from school days, through skills training and onwards.
We are taught how to read and write. How to follow instructions and answer questions. How to replicate what we learn. You develop expertise in how to do ‘things’.
In other words, your expertise and skills invariably lie in the PROCESS function. Consequently, with the skills and knowledge loaded towards the Process function, businesses can only grow whilst there is capacity within the Process function to do so.
But without the same relative development in the management and in particular marketing functions either side, growth becomes limited…
The cycle now starts to look very different (see diagram on left).
So the solution is simple…
You need to start putting more effort into the marketing and management functions of the business to realign the balance.
This doesn’t mean you neglect the process function.
It just means you work smarter and allocate your time and effort better to include these two crucial areas of your business.
So, there is little doubt as to why most businesses do not achieve the growth objectives the directors or partners have set and why now is the time to make the transition from a process-led business to a management- and, in particular, a marketing-led business.
Our goal is for you to have a systems-based business that’s set up to achieve your objectives. In each issue of this newsletter, we’ll do our best to give you everything you need in order to achieve this goal.