In the rush of getting the job done each day, taking the time to plan for growth can seem a daunting task. But if you have aspirations to grow, proper planning can make the difference between success and just dreaming.
Start planning with a “big picture” perspective of where you want the business to be in the near future. Typically, a 3- to 5-year timeframe is just enough of a stretch to challenge your daily mindset, but smaller businesses may find even a 1-year or 2-year timeframe equally challenging, especially if the anticipated growth is more than modest.
Fill in the Gaps
With the end goal in mind, step back to determine what it takes to get there in increments. Unless you plan to be the next Walmart, you can expand in phases rather than doing it all overnight.
The first step in planning for this growth is identifying the gaps between today’s reality and the vision of the future. That analysis should include, at a minimum, these considerations:
- Products and Marketing
- Facilities and Equipment
- Personnel and Efficiency
The review needs to be done with discipline and a commitment to being honest with yourself on each point. If you conduct the review without challenging your own assumptions and biases, you may start off on a journey that heads down the wrong path.
How Much for Those Widgets?
Challenge number one is figuring out what is going to change to generate the growth you are anticipating. Capitalism centers on one key question: What are you selling and who is buying it? Whether you are selling tangible goods or software, the skills needed to create one item and sell it may not be the skills needed to grow those sales. Whether the business sells to consumers, other businesses, or the government, the question of what to sell and how to get the attention of the buyer remains critical.
In planning for growth, you may need to consider changes to the product line and how the products are marketed. Among the considerations: Do I have the right products, assuming I can get production right? Are the profit margins for each item right, at today’s volume? [Note: If you can’t answer that question, you may have a personnel need.] Would other products expand sales to existing customers? Would other products expand sales to new customers? What product mix would bring the most profit with the least investment of time and money? Do some products need to be revamped, or eliminated?
While these questions can be politically difficult (e.g. can you really kill off the product that got your business started?), they are crucial to moving the company forward or even keeping the company in business for the long haul.
Where Are You Going?
Determining where the business will be located when the company is larger can often be the hardest part of this planning exercise. The current facility may be very convenient, but does it offer enough space to meet the needs of a larger company? If not, careful consideration needs to be given to when the next facility is needed, what to do with the current facility if owned or under long-term lease, whether to buy or lease, where it is to be located, and how it is to be paid for.
An important consideration in the space requirements planning is the equipment that will be needed to produce your products at the desired level. Beyond the square footage needed, there may be special requirements: unusually high ceilings for taller equipment; highway, airport, or rail access for incoming shipments of supplies and outgoing finished product deliveries; clearance for moving parts; flow from one machine to another; and scrap disposal. For service providers, similar concerns would be alignment of departments to allow for easy interaction, common workspace for collaboration, and secure areas to protect customer and project data.
Care must also be taken to think through the environmental needs of both the equipment and the personnel operating it. If the equipment produces more than a moderate level of heat, noise, dust, or other environmental hazards, special building needs such as ventilation and firewalls may come into play to mitigate the hazards and provide a safe and pleasant working environment (and avoid problems with OSHA).
Depending on the value of equipment, products, supplies, and data, additional security may be needed as well. Proximity cards can provide records of employees entering a facility, and high definition cameras have become a much more affordable way to monitor the facilities, even in the middle of the night.
Who Can Do the Work Best?
Many entrepreneurs and leaders of growing businesses struggle to admit that others can do what they do, and perhaps do it better. But in a growing business, nobody can do it all. There are not enough hours in the day to build the business, operate it, and enjoy some personal life as well. If you want to grow without killing yourself, you’ll likely require additional people.
Once you are ready to admit that additional people may help you grow, the next consideration is what skills that person or people will need to succeed. Those skills probably won’t be the same skills that you, the entrepreneur, has; rather, the new position should have skills that complement the existing team and expands their capabilities. In envisioning the business some years from now, it can be easy to forget that additional requirements will be placed on the organization. You may need more data on how your company is performing, insight into the profitability of individual customers and products, better marketing, newer technology, etc.
An often-overlooked component to this discussion is whether to hire the expertise needed or outsource it to consultants or other firms, perhaps even a competitor. As an example, not every business can afford to hire a patent attorney. And even fewer could afford to hire multiple patent attorneys to ensure they have someone available should the first one leave or be on vacation. While that example is admittedly extreme, the same challenge should be put to any decision to hire: Do I have the resources to hire the position, hire right, pay the right amount to retain the talent, and hire the depth of talent needed to ensure the company can go on if that person were to leave?
Smaller shops in particular may find that certain areas of expertise are best outsourced to firms that have already made the investment in hiring, training, retaining, and building a team of subject matter experts. Information technology is one example. A person who can set up a small network for a five-person company may not have the skills needed to scale and secure that network to accommodate 50 people operating around the country.
The number of people required to perform a task is directly related to the efficiency and effectiveness of the operation. Larger companies can attest that the number of footsteps needed to move a widget from step 1 in manufacturing to step 2 will be a major factor in how many of the product can be produced in a given time. How well the product is produced – that is, how many of the products ultimately get rejected – also is a major concern. An important step in planning for growth is ensuring your business is effective before you press the accelerator. Performing a job poorly or inefficiently may work at smaller companies, but as the number of times that process gets executed increases, the lost opportunity from failing to fix the process up front increases as well. The time to get the process right is before the growth begins.
Succession planning is also critical for each key position. In a perfect world, you’ll have staff on hand that, if any key position becomes vacant, will serve as a replacement immediately. In reality, it’s rarely that simple. Instead, consider a three-step process to plan for succession:
- Identify the key positions and determine the risks associated with each potential vacancy. Are specialized skills involved? Is the position likely to be vacant in the near-term because of pending retirement or illness?
- Identify the best possible internal and/or external candidates for the position.
- Recognize any skill gaps in the candidate, and develop a plan to ready any internal candidates for the position.
One method to help visualize succession planning is to list each key position, the candidate, and a ranking of their fit for the position along with a timeline of when they may be ready. For example, the succession plan for a position may take this form, using school-style grades for each candidate:
|Position||Incumbent||Immediate||3-6 months||1 year||3 years||5 years|
|VP – Sales||Jane Doe||Candidate 1 (A)||Candidate 2 (B-)||Candidate 3 (C+)|
It will not be uncommon to find there are positions for which there is no clear candidate to successfully fill the position immediately, such as the example above. One key element to the planning is to be realistic in the review process, so that you can take action where gaps are identified. If nothing else, you may find you are very sensitive to retaining a key person and need to take action on that front.
Succession plans should be updated often to take into account new or terminated employees, changing conditions in the company, and development of the identified candidates towards their goal. Some candidates may develop more quickly than expected, while others may lag or prove to not be a fit. Those elements should be incorporated into an updated succession plan to minimize unpleasant surprises when vacancies occur.
While some growth factors such as expertise can be learned, many of those growth factors—additional people, facilities, equipment—require money.
The money to fund growth can come from a number of resources, including loans from banks, friends or family, partners, or sale of stock.
Many small businesses also are eligible for funding through the Small Business Administration, U.S. Department of Agriculture, or Small Business Investment Corporations. Your business banker’s goal should be to help your business succeed, and help you navigate through the number of options to determine the right fit for your needs.
Back to the Present
With your long-term vision in mind, the next step is to break down the gap between that future and today into modest, achievable steps, prioritize those that will bring the greatest benefit first, and execute the plan. Focusing on the steps that bring you the greatest benefits will help to get positive momentum at the beginning, generating results that feed the next phase. For instance, introducing a product or service that has an immediate profit potential can yield increased revenue that can then be reinvested into other products or services that may take more time to find their market or reach profitability.
Realizing your growth potential is gratifying to any business owner, but it takes planning to make sure you’re ready for that growth. If you consider all of the key elements involved, you will be much better prepared for any complications that arise in the growth process, and be able to adjust your plan as needed to make sure you achieve your long-term vision for your business.