SMEAZ BUSINESS GROWTH STRATEGY PROGRAM
IS GROWTH ACCIDENTAL/LUCK? “Having in place a simple, yet on-point business growth strategy for any small business or start-up will represent an important step to remain strong and viable in business. Many businesses stagnate due to a lack of a written, business growth strategy. More than 90% of start-ups fail within their first year, and when questioned as to their business growth strategy, one discovers that it either does not exist or that it is full of generalities.” – Edwin Dearborn (Business writer)
IS GROWTH ACCIDENTAL/LUCK? “While luck always plays a part in any success story, attention to detail and a deliberate strategy will greatly improve the probability of success..” “Successful high growth ventures take a holistic view of the business. Every facet of the business is important. It is not sufficient just to have a great product or service.” – Dr Tom McKaskill (author)
WHY A GROWTH STRATEGY? Provides Roadmap Clear Vision of your destination Directed effort/Purposeful activity Breaks overall goal down into manageable stages
STAGES OF BUSINESS GROWTH (BUSINESS LIFE CYCLE) Existence Survival Success Take-off Maturity Decline
Existence Obtaining customers and delivering service/product (developing a business model) Unstable product/product quality Owner is heavily involved/ Business is the owner No or few systems and formal plans Business is loss-making Failure occurs due to: Failure to develop viable business model, or quitting or running out of capital.
Survival Demonstrable, viable business model. Key problem shifts to relationship between revenues and expenses (growing the customer base) Business generally operating around its breakeven point Limited number of employees, hierarchy starting to emerge Minimal systems development, basic cash forecasting Business still synonymous with the owner May grow to stage III(Success) or may remain here for some time Most SMEs remain stuck at this level for several years due to: Failure to grow customer base/ retain customers, and Failure to develop systems (especially people management) Lack of funding
Success Business is profitable, generating positive cash flows Highly structured, and now has professional managers Advanced planning and management systems Automation Company now has own identity, apart from owner Owner engages in strategic planning to steer company forward Owner can: Stagnate Sell the business Exploit company's success as platform for growth to stage 4
Take-off Business now expanding from original area of operation Can be multi-stage (local, regional, international) Owner needs to transition from being Entrepreneur to being Executive Decentralisation and divisionalisation Systems expansion to manage multiple locations Owner needs to delegate responsibility to improve effectiveness. Generating cash, but will not be enough to meet growth demands. Avoid ill-planned investments brought about by owner impatience Often owners bringing business to stage III are unsuccessful at stage IV Omnipotence, omniscience and omnipresence
Maturity Business has achieved its vision Consolidation and control of financial gains Extensive and well-developed systems Challenge is retaining flexibility and entrepreneurial spirit Owner often out of the picture
Decline Business fails to adapt to changing market circumstances, customer needs/wants Competitors & innovators take market Lack of innovative decision-making and avoidance of risks Business dies due to lack of adaptability
Identify Your Stage of Growth Based on the stages of growth that we have gone through, identify your stage of growth Complete the online Growth Strategy Formulation Questionnaire (homework) https://app.process.st/checklists/Dummy-1- j5FcT5dUOlTHAY3dQENPMw
FOUR TYPES OF INVESTMENT Asset Project Business Entrepreneurial venture
FOUR TYPES OF INVESTMENT Asset (e.g rental property, shares, annuity) Low risk Low return Minimal involvement, little skill Usually requires high investment level Uniform, market-determined price Immediate profitability (1-3 months)
FOUR TYPES OF INVESTMENT Project (e.g chicken rearing, flea market) Subsistence-oriented Relatively low investment level Moderate to low risk Moderate return Moderate involvement, basic skills Very competitive, uniform pricing Short time to profitability if done well (3-6 months)
FOUR TYPES OF INVESTMENT Business (e.g consultancy, supermarket, farm, franchise) Commercial / growth-oriented Higher level of investment than project Moderate to high risk Good return if done well Moderate to High level of competition Requires active participation, skill/trade/experience Average turn-around time to breakeven is 6-18 months
FOUR TYPES OF INVESTMENT Entrepreneurial venture (invention, innovation, new product/service) High risk Super-normal returns Low or no competition High investment, especially in education/marketing Often requires steep learning curve for both entrepreneur and customers Very involving and challenging, passion Long turn-around time: 18 months+
Identify Your Type of Business Which of the four types of investment are you engaged in?
Set Your Vision 1) Product 2) Customer 3) Geography
Growth Strategy Your growth strategy is the plan that tells how your business will move from where you are, to when your business achieves its vision
Business Plan The business plan takes you from one stage in the business cycle, to the next stage. We will go through the process of developing your business plan over the next three days.
Key elements of growth Sales Growth Funding Developing Systems Ongoing Training & Development Human Resource Base
Key elements of growth SALES GROWTH Sales growth is primarily through two basic activities: 1. Getting New Customers Marketing strategy Expansion of number of outlets Building networks & partnerships 2. Retaining Existing Customers Service delivery System for retaining customers/repeat business
Key elements of growth SALES GROWTH (cont.d) Sales growth process 1. Identify customer for whom our product is a need (vs want) 2. Identify niche market (segmentation) 3. Develop Marketing strategy
Key elements of growth FUNDING Debt Funding 1. Transaction-based funding (i.e. order finance, invoice discounting). 1. Loan repayment is based on a specific, identifiable transaction 2. Suitable for Existence and Survival stages 2. Fixed term funding (capex, term loans, working capital) 1. Loan repayment is based on cash flows of the business 2. Needs business plan 3. Suitable for businesses that have gone beyond break-even (survival), success +
Key elements of growth FUNDING (cont.d) Equity Normally applies from Success stage onwards Proven, viable business model Used to achieve rapid expansion, especially for take-off stage Would result in owner equity erosion if carried out at existence or survival stages
Key elements of growth SYSTEMS Systems enable us to measure and manage performance Systems need to evolve as the business grows We start with basic systems, and go all the way to extensive and well-developed systems Systems should be appropriate and relevant to the stage of growth Common misconception that destroys businesses is to start with full-fledged systems in infantile businesses
Key elements of growth ONGOING TRAINING & DEVELOPMENT Self-development Development through interaction with others
Key elements of growth FOUR STAGES OF LEARNING
Key elements of growth SELF & SOCIAL AWARENESS
Key elements of growth HUMAN RESOURSE BASE People are critical as the organisation grows Having the right people enables growth; the reverse is also true Common HR mistakes within SMEs Hiring unqualified/incompetent staff for task Nepotism Over-reaching Must be able to engage, direct, manage staff Manage mind-sets, expectations, advancement Offer what large organisations cannot Mentors, Board of Advisors/Directors
Key elements of growth HUMAN RESOURSE BASE
Tailored Growth Strategy Each business is unique, even if doing similar thing to others. Unique competencies, talents, abilities, visions Focus on, and develop strengths, minimise weaknesses and diversions PASSION!!!
Summary There are three essentials for growth: Growth Strategy (Vision setting) Business plan (Short term plan) Action plan (Implementation plan) Our programs help you put these in place https://www.smeaz.org.zw/
“Luck is when opportunity meets preparedness!”
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