Growth is the ultimate aim for virtually every tech start-up and many SMEs operating in B2B markets.
However, the road to growth is by no means a smooth one. As your start-up or SME continues to grow, it will go through 4 stages:
- Starting Up
As your company goes through each of these stages, pressures may arise which can curtail its growth. Therefore, it is imperative that your start-up or SME change over time so that your growth opportunities are not strangled by weak structure or inadequate capabilities.
In this article, we look at the pressures that can arise in the first 2 stages of growth: Starting Up and Forming and what can be done to overcome them.
Stage 1: Starting Up
Key characteristics of this first stage of the growth journey (which many of you are currently experiencing) include:
- Small number of people
- Limited funds (with little to no cash flow)
- High levels of motivation
- Unstructured (with a few people doing everything across the business
As your B2B tech start-up or SME increases, begins to expand the pressures faced include:
- Production pressures due to an increase in the number of orders as well as increased demand for product variations and customization
- Production delays due to limited resources and not keeping pace with demand
- Constrained cash flow due to:
- The extended lead times as you cannot charge your customers for orders you have not filled or services you have not delivered
- Explosive growth can lead to cash flow shortages as scarce capital is invested in more people, equipment and systems to increase capacity.
- Pressure on Founders and Owners: Rapid growth and no clear delegation structure can have founders and owners as well as the rest of your team working very long hours over an extended period of time which leads to exhaustion and burnout. This can result in lower productivity, delivering lower quality products and services which can undermine your company’s reputation and likelihood of securing future business with the customers being impacted.
WHAT TO DO
As a founder or business owner you must acknowledge that in order for growth to continue, you must fundamentally change the way your start-up or SME operates. This may happen either rather suddenly or occur in small steps over time.
The key steps to get past this stage are:
Hire specialists: In order for the company to achieve its goals, as a founder or business owner you cannot do it all. Hire ‘doers’ that are skilled to complete key functions such as marketing, customer service and support, finance etc. To help manage the costs, consider using freelancers or interim/contract staff.
Introduce processes: This will help eliminate wasting time and resources and ensures consistency in terms of how things are done within the business. Introducing new processes, also referred to as process innovation will enable your B2B start-up or SME to scale up in ways that allow for embedded change and improvement.
Introduce financial Disciplines: Establish financial controls to forecast revenues and profits. This will not only help with business planning but will ensure you have the discipline and the means to invest your income to further build the business. Again, consider using interim/contract finance specialists if you lack the knowledge and skills in this area.
Tell-tale Signs That You Need to Transform
- Increasing lead times
- Customers complaining how long things are taking
- Not retaining cash to invest in people, equipment or systems
Stage 2 Forming
At this stage, your company typically has between 10 to 30 people. For the first time you will have some of them reporting to other people. The ‘magic’ number where businesses start to struggle is around 20 employees. At this stage, you need to change how the business operates and create a structure that works with a larger number of people.
Key Characteristics of this stage include:
- Unclear responsibilities
- Expanding client/customer base
- Feeling of chaos: as you juggle running the business, managing staff and servicing customers
The key pressures at this stage are about people, process and time. Founders and owners often feel it more as they are the ones who need to look at their methods and change them. Key forming pressures include:
- People Issues: As a founder/owner you will be spending more of your time dealing with your staff and their issues.
- Quality Suffers: This occurs when new people are brought into the company without strong documented processes in place. As you are juggling to handle more people and issues across the business, you will have less time to focus on customers and meeting their needs.
- Lack of Focus: With new people and customers on board, you will be tempted as a founder or owner to try and do everything yourself
WHAT TO DO
The key is to specialize and delegate. This means you will have people working ON the business (creating processes, determining the way forward for the business) instead of working with customers. As the founder or owner, your role may also change. You will need to think about where you can add the most value for the business. It may not necessarily be in the running the business itself.
Other key actions that you must undertake to progress through the forming stage include:
- Develop strong budget processes: To facilitate strong cash flow and cost management enabling you to reinvest in the business
- Formalize your organizational structure: To ensure roles and responsibilities are clearly defined and understood
- Apply core principles around customer listening: As more people come into your start-up or SME some of them will not have first-hand contact with customers. You need to embed customer listening and make capturing and using customer input within the DNA of your business
Tips for Managing Growth in the Forming Phase
- Engage a technical writer to help document your processes
- Review your technical environment and develop a strong intranet with workplace platforms such as Slack to foster effective collaboration
- Choose a CRM platform and develop a process for monitoring new leads
In Part 2 of this article, we will discuss the pressures your B2B start-up or SME may face as it goes through the spreading and corporatizing faces.
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