When it comes to business…bigger doesn’t always mean better. Small business and small to medium-sized enterprises (SMEs) owners and managers often think big and dream big. At first glance, that’s an obvious approach. For instance, if small business owners/managers didn’t dream big, they probably wouldn’t be in leadership positions in the first place. Owners and managers need to have a long-range outlook, especially with goal-setting. Having that vision becomes necessary for small businesses and SMEs to grow, prosper, and become long-term sustainable entities.
Goals Must Be Genuine… Because Bigger Doesn’t Always Mean Better
Sometimes small businesses need a dose of reality if the long-range goals are unachievable. Even though a business may be thriving today, small business owners/managers must realize they can’t rest on their laurels. Success translates to the ability to meet obligations to customers, employees, investors, or lenders. A loss of business could be the end result if a small business “drops the ball” for any of its backers.
It may seem odd, but there could be negative consequences for that small business which takes on too much business. As our parents would say to me when I was young, “Don’t bite off more than you can chew.”
Even though a small business, because of exceptional implementation strategies, encounter impressive growth numbers. That doesn’t necessarily translate to unlimited success. There may have been enough resources to handle everything in the early stages of the business. However, those same resources might have reached their capacity earlier than anticipated. Then unexpectedly, this same business realizes it can’t grow any further without more resources. Those resources could be the need for more money, additional skilled workers, or a larger or different location.
Careful planning, while establishing realistic goals, are the keys to avoiding the pitfalls of a quick-growth potential business and preventing a fast-growth, potential business catastrophe. Having enough money is only one aspect of a business’s overall long-range plan.
Here are some of the areas every small business must consider:
Budgets: Develop short to medium-term budgets. These plans should forecast cash flow and future capital asset needs.
Staffing: Staffing should not be all about hiring people. Instead, the small business owner/manager should envision what types of employee skills are needed along with salary predictions, recruiting, and training strategies.
Location and equipment: Location…location…location. That’s what every realtor preaches. It’s no different for a small business. Every small business owner must decide upon the right location for its customers, employees, and vendor deliveries. The small business owner also must consider potential expansion opportunities, along with the necessary fixtures and equipment associated with growth. Finally, does the small business owner want to focus on a brick-and-mortar facility and/or conduct business online?
Technology: The advances in technology occur lightning fast in today’s world. Therefore, every small business should regularly review its hardware and software needs. Technology upgrades may be required if there’s an increase in business.
Supply chain management (SCM): With potential business growth comes possible changes in a business’ supply chain management (SCM). As a result, each component of a business should be viewed as one so there’s an efficient SCM throughout the whole business.
Vendors: Small business owners must consider the impact of growth on vendors. Undoubtedly, there will be a need for more raw materials, along with having enough inventory and supplies on hand. It’s also important for small business management to compare costs and look for alternate sourcing opportunities. With business growth, small business management may need to increase the list of vendors and potential vendors. Overall, it’s good business for every small business to have contingency backup plans.
Marketing: Increased business can’t happen without a sound marketing plan. Therefore, it’s critical for a small business owner to understand the business’ full market potential, target specific markets, and get the most out of extra marketing opportunities.
Capital structure: As the saying goes…”cash is king.” As a result, a small business can’t run out of money. Before a lack of cash becomes a crisis, small business owners must explore all options for additional debt and equity financing.
Identify Internal Resources
Rapid expansion can force a small business to rapidly overtake its internal resources. To avoid this potential pitfall, every small business owner must continually conduct a “temperature check” of the business’ strengths and weaknesses. Through this evaluation the small business can make the most of its strengths and eliminate its weaknesses. Conducting this appraisal early in the growth process lays the groundwork for successful growth. As stated earlier, bigger doesn’t always mean better. So, every small business should not wait until the last minute to adjust its plans. Instead, small business owners should be one step ahead and be prepared in advance for when the rapid growth appears. In that case, bigger can be better!
