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What Do High Growth Businesses Do Differently?

Over the past 5 years the importance of the “High Growth Business” and how this relatively small group of businesses disproportionally impa...

Wednesday 25 November 2015

Staying Ahead of the Hammer - How to Build and Manage Your Business to Achieve Long-Term High Growth

Staying Ahead of the Hammer - Laurence Ainsworth
The challenge for high growth companies is how to sustain growth. It's a sad fact that 40% of companies that experience high growth go through a period of contraction immediately afterwards.  The issue for High Growth businesses is often not only how to develop sales but more importantly, how to deliver against the increased sales that they've made. Put another way the growth of the organisation to deliver increased sales has fallen behind the rate of growth of sales themselves. This simple imbalance almost inevitably results in a hard landing for the business.

Over the last 5 years, we have developed a model to help High Growth businesses meet this challenge. We call it Staying Ahead of the Hammer. It's based around seven key elements that help business owners understand and prepare for coordinated organisational growth. 

Our experience using GrowthAccelerator clients as well as other high growth clients have delivered an average growth rate of nearly 50% with profit growth of 46%.  The real value of our approach is to enable sustainability of high growth.

Our approach is based on seven areas. The Keystone is helping businesses develop a Vision for their business. “A vision provides the reason why you are in business and as a decisive leader gives you the direction around which to enthuse your team and your customers.”. Next we get owners to look at the Culture of their business to see if it supports or hinders a high growth environment and the level of employee engagement.  

Having looked at what I would call the infrastructure of the business we turn our attention to Strategy and Planning. This section helps Leadership teams build a strategy and just as important develop a process to implement it. “In a High Growth Business you have little time to ponder about what might be happening in your business. Having a clear strategy and an implementation plan gives you detailed landmarks which will quickly identify when things are off course.”

The following four areas the first is Talent Management: “People are a business’s most important asset and recruiting the right people is fundamental to its success. Existing staff will fall into two categories; those who can grow with the business and those who can't. Knowing how to get the most out of these two sets of people is key to any long-term success.” 

We move on to Financial Management and Control: “Accurate and timely financial information which goes beyond the basic P&L and Balance Sheet is necessary to enable the owner or his management team to identify issues early enough to take the necessary corrective action.” Decent financial understanding of the business mechanics is a very common weakness in high growth businesses. We help businesses understand that you can't have too much financial information about your business. This is because you often confront problems where you have no information on which to make a decision. In such circumstances, it's almost impossible to make the best choice. We also use this mechanism to help businesses understand the need to look forward as far into the future as they can in order to identify potential issues before the become major problems.

Our penultimate section is on Organisational Efficiency as “There is nothing customers and suppliers hate more than inconsistency in their dealings with a company. The value of processes is that they bring that consistency to the vast majority of interactions and at the same time deliver a framework for increasing company productivity.” We also introduce the idea that businesses should be output driven (KPI's) rather than input driven undirected hard work.

The last area we look at is Business Development. This often because getting sales is the least of the businesses problems. What they do lack is understanding how to reliably forecast sales as “Accuracy in forecasting sales and, therefore, income, is vital to drive the cash flow needed to support a High Growth Business”

The model itself  has the flexibility to allow businesses enter at different points depending on what is causing them most pain. Inevitably they will have to come back to the Vision element and work back through the model.

This has been turned into a book which is released on 27th November. It is one of the few comprehensive books on high growth and what it takes to maintain growth over a number of years. Balancing these several elements is what makes this process such a challenge.  

For those of you who are interested you can get the book at Staying Ahead of the Hammer .

I look forward to hearing your comments

Wednesday 6 May 2015

Are You Squeezing the Lemon?

I've seen in recent weeks a whole raft of articles and blogs about the need to grow your business and how you can grow sales by using various channels from Facebook to plain old cold calling. As usual this is the easy target because most businesses have a need to get more sales.

I thought therefore it would be interesting to focus on a different area of the business and one which can just as easily wipe out your profits as a lack of sales. That is your the processes you use to deliver what you sell and collect money from your customers. I call it squeezing the lemon because in or to help maximise your profits you need to squeeze every once of efficiency and productivity out of you delivery systems.

Are You Squeezing the Lemon?

The problem is often that this is the part of business operations that is often overlooked. As is collection of money. In a recession we all say that cash is kind, but its no different now that things have improved. Almost invariably as sales improve the focus moves away from collecting the money. This is the equivalent of restricting the supply of oxygen to a mountain climber. Yes they might manage to go on but it just makes it a lot harder, and is so unnecessary.

The most obvious measure is your debtor days which is simply the amount of money currently outstanding divided by your current turnover times 365. Your objective then is to keep your debtors days don as low as possible. This keeps cash regularly flowing back into your business and will support further growth.

Squeezing the Lemon isn't just about cash but your whole production and sales support processes.
For example, its making sure that you keep your product delivery times the same, and that you don't allow your quality to be compromised. Or that you have sufficient resources to deliver the same or better quality of proposals to the increased enquiries from customers and prospects.

How might you do this? I know a number of accountants have an ability to benchmark your business against similar organisations in your industry. This will give you a broad areas where you over or under perform your industry average.  If you accountant can't help you then its up to you to start finding out how your business is performing. You can do this by setting clear targets, often called KPI's, about the expected performance of parts of your business. I would suggest that you should be setting KPI's for your business anyway.
This could be as simple as:
The average response time for a query into the business.
The average time to produce proposals.
The target time to produce a sub-component.
The target for the percentage of goods delivered on time
The target for the level of customer experience

The key point here is not to take your eye off doing the basics properly and as efficiently as possible. Even a small, 5%, fall off in performance in a couple of areas can have a material impact on your bottom line.

For example, I worked in an automotive business and we had regular quarterly meeting to`see if we could reduce the time taken to produce our 10 biggest sellers. We were often able to save 1% in time by making changes to how we manufactured the components. That's 4% per year, but measured over 10's of thousands of items it has a big impact and can often be the difference between making a loss and making a profit.

The thing about Squeezing the Lemon is that you are constantly looking for improvements in performance to minimise the your costs of production. Normally we all focus on this in a downturn because with lower sales we must reduce costs. By contrast, as soon as sales rise we have a tendency to put efficiency on the back burner. Surely it makes sense to keep squeezing the lemon even when sales are up.

Exigent Consulting provides specialist services for Managing High GrowthBusiness Turnaround, and Mentoring to the Small and Medium Business. We help business owners improve the profit performance of their business. 

Tuesday 17 February 2015

Driving Change

As a business leader it is always your responsibility to make sure things happen. When its in the companies and therefore the individual's comfort zone thats pretty easy. Often all it needs is a light hand on the tiller to make sure actions get completed on time.

When it comes to change in the business or the push for further growth then the situation requires a much more robust approach. One of they key messages here is that you set the standard. As the leader, whether you're a unit head or CEO everybody including your leadership team will take their cue from you. So if you are less committed to an outcome than your leadership team members they will default to your position. 
English: Change Management's Approval flow Ita...
English: Change Management's Approval flow Italiano: Change Management, flusso della fase di approvazione (Photo credit: Wikipedia)
To effect change in your business you have to demonstrate you are totally committed. This means that you have to be an extrovert in your commitment to the new position whatever kind of change that might be. The more obvious your commitment, more likely you'll succeed. Whilst this public relations initiative is important, commitment alone wont get the job done. People are creatures of habit and change is unnerving, if you want to see this in action, next time you're at a conference, when you come back from a break sit where another person has sat and just see the looks or comments you get. I see it regularly where neighbours with only "on street parking" start to argue if other people park in "their space".  The bigger the change the more people will resist. To succeed in this endeavour you need a clear process to follow to maximise your chances of success.

Step 1  Do a plan of the change process. 

Plan where you are going and what changes in business practises will be necessary to get you there. As part of that process you will need to identify what you are going to do differently and how that will change what gets measured.  This part is particularly important as it will be these changes in your priorities which will be the source of most concern to your people.

Step 2 Be the First to Commit

You must be the first to commit to the changes. Having identified your new KPI's(key performance indicators) start asking for information that supports your new commitment get people used to the fact that you've changed.

Step 3  Involve Your Leadership Team

Involve Your Leadership Team
(Photo credit: Wikipedia)

This is a two part process, firstly get them together and a group and discuss your plan for change. Take feedback from the group obtain their buy-in for the change process. The second part is to meet each of your leadership team individually and discuss their own commitment to change and re affirm individual buy-in and agree how they will roll it out in their area of responsibility.

Step 4 Set up regular reviews

Use them to discuss progress and address issues where individuals commitment needs to improve. Identify the change blockers within your organisation, and set a course to neutralise them.

Step 5 Drive Change Down Through Your Business

Get your leadership team to adopt a similar approach with their own team, as you have to the leadership team.

This much more likely to deliver a successful change programme as it is driven down through the business. Regular reviews will identify issues  which can be considered and the appropriate solution implemented.  

If you need to achieve significant or rapid change its a good idea to do this through small multiple steps. You see once people make one change, the next becomes easier, the third easier still and suddenly change becomes the new norm. 

To illustrate this let me recount how this was illustrated in a recent workshop I attended. Complete strangers were paired up and the rules were simple, take in turn to make one change about your appearance, the other person then had to identify what the change was. So one person would turn their back whilst the other made a change. Initially the changes were subtle and slow as peoples natural caution to change manifested itself, it was often something like a slight adjustment of a tie or removal of glasses. By the 5th round they were rapid and even outlandish, with jackets, shoes and even shirts were being removed; people had very quickly got comfortable with change.

Change still requires significant effort but the more frequently you pursue it the easier it gets.

Exigent Consulting provides specialist services for Managing High GrowthBusiness Turnaround, and Mentoring to the Small and Medium Business. We help business owners improve the profit performance of their business.