It's extremely important to measure progress in your small business. There are so many ways…
Step Outside Your Business to See the Bigger Picture
In the 90’s, I worked closely with over 40 Small Businesses with aggregate annual gross revenues of $600+ million in probably one of the most successful agency networks that you probably didn’t know even existed, as their ‘intrapreneur’, responsible for strategy, financial and systems analysis and advice.
It was before ‘franchising’ became fashionable, sexy and (apparently) easy money. When visiting these Small Businesses, I would, if I felt the need to, offer the entrepreneur(s) to go for a walk with me around the block. Sometimes it took two or three blocks, but these discussions were invaluable. We spoke freely and openly, they were outside of their daily routine, away from paper reports, away from walls with ears and we were able just to exchange ideas; we were learning and creating.
If you are an active person give yourself some time to ‘think walk’. Whilst walking imagine yourself not ‘doing’ but ‘thinking’. Think macro, what do you see growing in your future and what do you see not?
To grow your business, you need to have a business growth strategy. There are four growth strategies that you can implement. All of these strategies are equally valid however applying the right strategy, or a mix of strategies to your circumstances is critical.
Four business growth strategies explained:
1. Organic growth.
Organic growth means you have achieved sustainable sales and return on equity. You are confident of executing your strategic plans without the need to invest in external opportunities. You are fine-tuning return on equity and have no intention of exiting. Organic growth is creating excellent value and all capital invested improves incremental returns on equity and long-term wealth.
2. Vertical growth.
Vertical integration means acquiring businesses and moving closer to the end user or resource in the supply chain. Understand where your business is situated in the supply chain, what sustainable competitive advantage you have and how to leverage value from vertical integration. You are deciding to use scarce cash or debt resources, so your strategy and due diligence are critical to successful execution.
3. Horizontal growth.
Horizontal integration means purchasing businesses to expand your presence in your current segment of the supply chain. Again, you are deciding to use scarce cash or debt resources, so your strategy and due diligence are critical to successful execution.
Exiting is a legitimate growth strategy. Your growth comes from not riding the industry or segments down as creative destruction inevitably shakes it out. Selling your business before others understand the deteriorating cyclical industry economics allows you to preserve the capital you invested and hopefully some of the value you created. That may provide you with capital to create and invest in your next sustainably competitive business.
What stage is your business at?
The least amount of change that will happen in your life is today. Change is either slowly evolutionary or quickly revolutionary. Being aware and implementing the right strategy for your business’s current position is imperative.
For example, look at the transport supply industry. First, it was the taxi plate owners who bought more plates (valued around $500,000+ each set) only to then watch Uber’s gross sales grow to $46 billion (net $9.4 billion) in 2017, with Uber paying $10 billion to drivers and Uber still lost $5.6 billion, for developing an app.
But change is continuing. Major car manufacturers are creating pools of vehicles that you can hire, not own, and unlock with smartphone app access codes. Unfortunately for Uber though, Waymo (Alphabet, previously Google) is set to launch a driverless ride-sharing fleet in Arizona with a permit granted on January 24, 2018, to operate on a fee earning basis. These vehicles will self-drive to your home, and they will not be paying $10 billion to drivers. Even Uber is being creatively destructed today.
Remember, your competition now is or will probably be, global and digital. Distributed Ledger Technologies (DLTs) and Hyper Ledger Technologies (HLTs), aka crypto’s, will decentralise and disintermediate entire industry supply chains globally. The ASX is adopting block chain solutions from March 2018. Global competition also creates future competitive regulatory issues, however, more importantly, your entire industry segment may just become extinct, regardless. Artificial intelligence is only growing, make sure you do as well.
Give yourself permission to regularly ‘think walk’ and ensure that you are constantly looking at the big picture of your business and that your mix of business growth plans is right for where your business is at. Sometimes the best ideas are had on that extra lap of your block!
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
SHARE THIS ARTICLE WITH LIKE MINDED SMALL BUSINESS PEOPLE