Profits On Purpose | 5 Barriers to Growing your Business
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5 Barriers to Growing your Business

Trying to grow your business and having a hard time?  Join the club!  Growing your business can be one of the most challenging things you do. If you’re having a hard time, here are 5 of the most common barriers to growing your business.

 

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  1. You’ve outgrown your money. Sometimes you take too much money out of your business and there’s none left for growth. You can certainly borrow up to a point, but when your leverage gets high enough, the bank will say no and you will be left to either borrowing against your accounts receivable (very expensive) or taking on an investor (even more expensive). Calculate your sustainable growth rate (SGR) which is the level you can grow without borrowing. The calculation is ROE x (1-distribution rate). So, if your return on equity (profit/net worth) is 20% and your distribution rate is 50%, your sustainable growth rate is 10% (50% x 20%)
  2. You’ve lost momentum. Momentum is defined as force of motion or impetus of human affairs. If you feel your company is stagnant, regaining momentum starts with you, the owner. Start with a little optimism. Your belief will become contagious and will quickly spread throughout the company. Clarify decision making processes. Clear direction is empowering. Finally, if you need to be a little dramatic, give the organization a kick in the pants.
  3. You’ve outgrown your management. Growth increases the complexity of your business. If you don’t have the appropriate expertise needed in sales, operations or finance, it becomes a barrier to your growth. Here are some signs that management may be struggling: all decisions rely on you, you’re feeling stretched too thin, your team is frozen in it’s tracks.
  4. You’ve outgrown your model. If your current model is not yielding the income you think it should, consider a forward looking forecast to see what changes you might make. To yield results, your operating model must be scalable so you can experience profits at a higher volume. It’s critical to have a dashboard with key performance indicators to see how you’re company is performing when you scale.
  5. You’re not aligned with your market. If you’re not properly aligned with your customer’s needs, a gap can open between what a company has promised and the operations required to satisfy them. You achieve market alignment when a business consistently delivers a value proposition in a simple exchange. If you can keep things simple so your company is easy to do business with, you will maintain alignment. However, when growth occurs, it increases complexity and keeping it simple becomes more difficult.
Sometimes we’re so busy working in the business, we don’t take time to work “on” the business.  It’s during these times when we step back and gain perspective that we can make the right diagnosis for barriers that exist and then prescribe a solution to re-position the company for growth.
Bill McDermott
bmcdermott@mcdfs.com
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