Ask what drives an entrepreneur and the answer will be fairly predictable: growth.
Company founders and managers spend their working lives trying to grow their businesses as quickly and sustainably as possible. In the eyes of many entrepreneurs, the challenge of growth is what makes business exciting and rewarding.
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But how many entrepreneurs stop and ask themselves if they are growing just for the sake of it? Why do you want to get bigger?
That was the question posed by entrepreneurship expert Dr Tom McKaskill at a recent roundtable hosted by PwC’s private clients division in Melbourne.
According to McKaskill, too many entrepreneurs think about how to grow before they think about why they should grow.
He says there can be some very good reasons to get bigger, including building economies of scale, growing to be able to handle bigger clients and increasing profitability.
But McKaskill argues there can be some poor reasons for growth too – for example, getting bigger simply for the sake of stroking big egos might not set your company on the right path.
If your rationale in growth is solid, McKaskill has some more questions to answer.
Ensure your value proposition is rock solid
The first is the question that every entrepreneur should constantly ask themselves: What problem do you solve?
The answer should encapsulate your value proposition perfectly. It should be concise – McKaskill says no longer than two sentences – and it should be consistent across the business.
Indeed, McKaskill suggests workshopping the question throughout your organisation.
Ask the principals of the business for their answer.
Ask your key advisers, such as your accountant and lawyer.
Perhaps most importantly of all, ask your customers.
If these stakeholders can’t sum up your value proposition quickly and easily – and if their answer doesn’t tally with yours – then you may have some work to do to redefine this key plank of your growth platform.
The right customers
The second plank of McKaskill’s growth platform is another apparently simple questions: Who do we solve our problem for?
He argues that one of the keys to sustainable growth is “attracting the right customers and getting rid of the wrong ones”.
The right customers are ones that have a genuine need for your product, will give you repeat business and are relatively easy to service.
The wrong customers might be difficult to deal with, purchase irregularly and require a high degree of customisation (which can mean lower margins).
Five elements to a good base for growth
McKaskill says there are five things that a business must have in place before it can launch its growth plans.
1. The right messages to the right customers
McKaskill argues that growth companies must ensure that they are hitting customers with targeted communications that will address the needs, expectations and subtleties of their sector.
For example, if you sell occupational health and safety services, to the manufacturing, mining and health sectors, targeted communications are required for all these niches.
“If you target different sector, don’t allow them to mix,” McKaskill says.
2. Set expectations
Many companies claim they go above and beyond to deliver exceptional customer service to their clients.
But McKaskill argues this can be dangerous – setting expectations too high means a business needs to put too much effort into servicing additional customers and may not have the resources to meet the needs of new ones.
He argues consistency is key. If a business can commit to satisfying customer expectations – not exceeding them – it will ensure it is seen as dependable.
A standardised level of customer service can also be delivered again and again.
3. Build a strong customer experience
Again, consistency is key. McKaskill says companies that can deliver a solid customer experience built around driving repeat business is in a strong position for growth.
This means building efficient sales and support processes that can be repeated for every customer.
When a business receives a complaint, it shouldn’t just fix that individual customer’s problem – instead, it should aim to reassess its entire customer service process to ensure improvements are made to every customers’ journey.
4. Focus your pipeline
McKaskill argues that a full sales pipeline is not necessarily a good thing – growth companies should focus on qualifying potential customers quickly to ensure resources are used to drive fast conversions.
“The right targeted messaging will help you avoid the wrong customers,” he says.
5. Engage with customers
According to McKaskill, on-going engagement is the key to turning customers into repeat buyers.
“You must see every customer as a salesperson,” he says.
This engagement might take many forms – newsletters, functions, award ceremonies, social media updates or training sessions.
Just make sure these activities are aimed at the right sectors.
Five growth keys
Once you’ve got a solid base for growth, it is time to consider five factors that will ensure you can rapidly become bigger. Here are McKaskill’s key elements.
For McKaskill, high growth is driven by a tight focus on the right products, the right solutions and the right customers.
“You cannot drive growth if you are solving lots of problems for lots of different customers,” he argues.
“Focus on a complementary range for a similar customer type.”
The best way to develop this range is of course to know your customers inside and out. This knowledge – and a focused offering – will mean you develop deep expertise in your niche.
“It’s the old story: the more I do, the better I get,” McKaskill says.
Businesses that scramble from deal to deal might keep increasing their revenue, but McKaskill argues the key to sustainable growth is building scalability.
“You need to ask yourself: How can I set myself up so I can do 10 units or 100 or 10,000?”
The answer is standardisation – an offer that is consistent and standardised is far easier to sell again and again.
While this is generally easier to do for products than it is for services, McKaskill says service providers can still look to standardise their operations.
“The key is taking knowledge out of people’s head and into manuals, documents and software.”
3. Plan for the future
If you are going to embark on an ambitious growth plan, it’s crucial to understand how this growth plan will change your company.
What will your business look like in one, two, three and four years time?
If that is a difficult question to answer, consider what resources and infrastructure you will need when you growth to have 20, 50, 100 and 200 people.
4. Systems and processes
Growth companies need to be constantly looking to improve and strengthen systems and processes by setting targets throughout the business, measuring and reviewing results.
Benchmarking against other businesses or sectors can be a useful tool and McKaskill says it is crucial to track all measurements over time to ensure continuous improvement.
Finally, McKaskill says it’s important to try to measure what’s about to happen in your business by studying leading indicators such as sales pipelines and leads.
5. Company values
“It’s important to be mindful of the directions that a company can grow in,” McKaskill says. The bigger a business becomes, the more difficult it is to ensure the values held dear by the principals of the business are still adhered to.
One tool McKaskill says can be used to test how values are changing in a business is to present “decision scenarios” to various staff members.
By asking how certain staff members would react in a specific situation – say, if a customer was found to have been overcharged for several years – will give you an idea of whether values are aligned throughout the organisation.