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Planned Growth

While the business start phase tends to have the highest risk attaching to it, the planned growth stage invariably is the most difficult and frustrating part of the business cycle. All experienced business people understand and accept that if a business isn’t growing it is dying. They also know that a business never stands still- it’s always either going up or going down and it’s difficult often to know what exactly is happening at any one time because it can be growing in one area while shrinking in another. Also every self respecting business person is always pushing for more business- this is not the growth I am talking about here because this kind of growth is incremental and is achieved through referrals and one-off marketing campaigns and by testing and tweaking all the things you do on an on-going basis to get new customers practically one at a time. Some business owners are content to accept growth at these lower growth rates because it is more manageable and less stressful even if it takes longer to achieve certain goals – but that’s ok too.

The type of growth I want to talk about here is the growth that requires major shifts in how the business is run to achieve the growth and then to manage it.

The first thing that must be settled upon before you launch into the growth programme is why you are doing it. There can be various reasons. You may aspire to getting your production service to a wider customer base because you believe it is good that as many people as possible deserve the opportunity to experience it. Or it could be that you’ve built the infrastructure of your business systems so well that it can easily cope with much larger volumes. Maybe your business has gone as far as it can through organic growth and it needs a big push to break through to the next level. Perhaps the reason is you have financial goals which cannot be achieved by current levels of business.

What if the reason is that the business needs to grow massively in order to support the existing operating base? Whatever the reason is, the growth strategy will be similar but the planning to achieve it will be significantly different. Before going any further, it’s important to point out that if you need to grow the business to support the operating base then you are probably looking at the wrong problem and expecting a good marketing plan to fix a bad operating plan is a sure way to destroy a business.

Moving on, as I said the ‘Why’ will always influence the ‘How’ and both will be different for every business. However having said that, there are several factors that will be common to most scenarios. Limitations to growth will be dependant on things like geography- where you are versus where the customer is, routes to market-online/mail order versus in-store versus providing service at the customers place of business or home. Customer type- affluent, mass affluent or shopping by price.

Bearing all this in mind the quickest way to gain market share is to buy it. Simply put that means finding a business that you can dovetail into your existing business and buying it over. That might mean buying one with the customers you want plus a lot that you don’t and you could end up selling them on- there are plenty of variations on how you can get what you want.

So let’s say that you figure out that part of it – what’s next? Surely its just a matter of business as usual- you have been running your own very successfully up to now so adding another one is just more of the same. Well its not. The single biggest reason for the failure of mergers, because that’s what we’re talking about, is the failure of the integration process with regard to the ethos, people, systems and customers of the two businesses into a single adhesive unit. Whether that be transferring one or other or both of the businesses to a single site or whether they are operated from multiple locations.

When you set up your first business it will probably have been achieved largely through youthful exuberance, an unending supply of self confidence and blind faith. When buying your second, you will be acutely aware of all the things you didn’t know anything about the first time around and you will carefully factor them into the buying process. What you probably aren’t aware of this time is the host of new problems that you are about to be presented with.

Every business is continually changing in the normal course of operations but it happens at a rate that is almost imperceptible- and this still can cause serious challenges. So when you are trying to manage change on a large scale throughout every aspect of the business the challenges can be almost insurmountable. If its not handled well you run the risk of not only losing a large chunk of the new business, you could also seriously damage your existing business.

So while it’s important to buy the right second business, it is then critical to allow time and sometimes money to integrate the two businesses. But when it is done properly the rewards can be very substantial.

Case Study

In 2005 , two clients set up their first business and built it from scratch and four years later they bought their second business and within two years it was achieving results equivalent to their first business. Earlier this year they started looking for their (third) business, but after finding what they wanted they eventually decided not to proceed with the deal because they felt that the challenges with integrating the third business would outweigh the benefits.

In my opinion they made the right decision but the only way they could assess the opportunity was to go through the whole process and examine how it would impact on their existing businesses. While the quick way to grow a business is to buy market share by acquiring another business, significant growth can also be achieved by developing an aggressive marketing plan designed to drive new customers to the business and the problems associated with this kind of growth are much the same as with buying a business.

So it’s important to consider every aspect of the impact that major growth will have on your business before you commit to it.