Embarking on a programme of growth is a major step for any business. It can involve changes in commitment, objectives, job function and reward, which are sometimes at odds with the business’s original concepts. Growth can therefore represent a dilemma. This guide will help you determine whether you and your business are ready for growth.

Getting ready to grow

Growth can be defined in many ways: an increase in sales, market share, size of workforce, etc. But ultimately what most businesses are aiming for is growth in profits. Many interconnected factors determine a business’s readiness to make profit.

Getting the timing right

Growing a business is a huge juggling act, balancing a large number of unpredictable factors amid a handful of certainties. Add to this the dilemma of timing: how to expand your order book, without the capacity to fulfil demand, or equally, how to gear up on capacity without the guarantee of extra business. Planning must be carefully managed. If the pace of change is too slow, business will stagnate; if it’s too fast then growth will outstrip funds, leaving you vulnerable in a competitive marketplace.

Business planning – why do it?

You’ve already turned your brilliant idea into a business. Now, if your business is going to flourish, you need to plan your next steps. Financial backers will want proof that you know where your business is going and where your customers are going to come from in the medium to long-term. In essence that is why you need a plan, to give you a sense of direction towards your ultimate goal and to communicate to others the robustness of your proposals.

The business plan is a dynamic document, unique to each business and vital to long-term success. A common mistake is to devote time and effort to creating a plan only as and when financial needs force you to do so.

What are the benefits of a sound business plan?

• It gives a clear sense of direction, forcing you to stand back and make an objective appraisal of where your business is going.
• It conveys the potential of your business strategy to lenders and investors.
• It acts as a performance tool, setting measurable goals and objectives.
• It motivates all concerned towards a common aim.

Marketing planning

Many newly expanding businesses fail because they concentrate too much effort on what they produce rather than how and to whom they are going to provide it; this is often because their marketing research and strategy is weak.

Before you write your marketing plan, you should research the marketplace, paying particular attention to emerging trends and technologies. It may be risky to expand into a declining area.

Talk to your customers

• Determine what they want and how their needs are changing.
• Ask them why they come to you and not the competition.
• Establish how they believe you can improve on quality, service, price etc.
• Make your presence known. Develop a marketing strategy and ensure that funds are allocated with the specific aim of raising your profile and winning new business.

Financial planning

The provision of finance is a frightening and complex prospect. Budget cycles, cash-flow planning and financial modeling are daunting issues. But a sound business plan should convince a potential investor that you have a clear understanding of your business and its position in the market, that you are aware of the risks involved, and have a commitment to future development. As your business grows, your requirement for working capital will increase. Planning for a growth in sales is very positive, but you must also plan how you will generate the capital to buy the stock in the first place.

Putting your plan into action

Premises

Lack of space is often the trigger for growth. It has been proved, for instance, that working efficiency and productivity can be compromised by cramped conditions. This, accompanied by a reduction in staff satisfaction levels, may well prompt you to relocate.

Expansion may be forced on you by an increase in demand for your product or services, which in turn may lead to an increased need for support or administrative staff.

Increased staff numbers will require the provision of extra facilities and equipment. Some requirements will be statutory, to comply with health and safety regulations; others may be geared towards staff motivation, for instance rest areas or water coolers.

Consider what your potential new surroundings might say about your business. If your business is in design, for example, let your premises reflect your talents and invest in a showpiece environment. If your premises are of a more functional nature, then concentrate on location and all the benefits a carefully chosen site can bring.

Your choice of premises will account for a large proportion of your ongoing costs, and you may be committed to lengthy, inflexible lease agreements. Expansion should be sufficient to accommodate projected growth, but not excessive so as to be a drain on resources. Start by asking yourself the following questions:

• Is it feasible to extend my existing premises, maintaining the benefits for which the site was originally selected?
• Would it make more sense to keep the existing premises and obtain an additional site? Could my business continue to operate efficiently out of more than one building?
• How would moving to an entirely new site affect existing staff, customers and suppliers?

Location

Relocation presents an opportunity to optimise many aspects of your business. When deciding on the right premises for your business, you should pay particular attention to the following points:

• If you are a retailer, you need to be visible and accessible. This may force your decision towards the high street and away from the retail park. If you’re likely to be heavily reliant on e-commerce, on the other hand, this might reduce the need for a premium-placed (and premium-priced) site.
• Locating your business alongside other prestigious names could gain you kudos by association.
• Before becoming financially committed, ensure that local authority approval will be granted for your business in your chosen location.
• Greater distribution and supply costs make it prudent to locate alongside good communication routes (including airport links if international trade is likely).
• Consider your levels of personal travel, and if possible choose a location that keeps your own commuting time down. 
• Will your new location be accessible to existing staff, and to new staff, who may need to be attracted in from a wider area?
• If multiple sites are unavoidable, consider accessibility and parking.
• Look at the make-up of existing businesses in the area. A small amount of competition can prove positive for a business, but too much can lead to saturation. 
• Use your judgement, and speak to people in the area, to determine what level of demand exists.

Capacity

Increased output can be achieved through increased efficiency and productivity, but when talking about real growth there will almost inevitably be a need for investment in the physical assets necessary to produce your goods or services. This will take careful planning, so that you neither overestimate nor underestimate your requirements. Consider the following:

• Look carefully at your projected needs in the short, medium and long-term. Increased capacity must be sufficient to cover your predicted sales, but idle machinery or production processes cost money. Plan for ongoing investment to keep pace with increasing volume.
• As your business grows you may find that your client list decreases, but the value of their orders increases. To ensure that you have the resources to cope with irregular but high volume work, it is worth tracking your business’s peaks and troughs over time to see whether a pattern emerges. That way, you can plan new business pushes when you’re running under capacity, and can have sufficient staff on hand for busy periods.
• Analyse the capacity of your existing equipment. Is it sufficient to deal with future growth or should you gear up to a more sophisticated plant, offering the additional benefits of better quality production?
• Take into consideration the potential benefits of scaling up your business. For example, unit charges for commercial electricity and telephone tariffs may fall in line with your increased usage. Conversely, you may now find that your organisation comes under the jurisdiction of local authority legislation regarding waste disposal, noise and pollution levels.
• To buy or lease? Leasing gives the benefit of flexibility and the ability to update more frequently – but then again, the greater the flexibility, the greater the overall cost.

Staff

Employment is a contentious area as you will probably have an established and dedicated workforce. If wrongly handled, bringing in external people can pose a threat to your existing staff; so getting recruitment right is essential.

As numbers grow, your relationship with your workforce may change. This is an inevitable side effect of growth and you must recognise your role in keeping the communications channels open as much as possible. A loss of control and hands-on management comes as a huge shock to many business leaders. Some functions must be relinquished, requiring a process of adjustment. Consider your new role and how you wish to be perceived.

Marketing

For your investments to succeed, you need either to gain more business from your existing clients and/or to market yourself to attract new customers.

Determine whom you want to pitch your business to. Are your existing clients growing with you, or are they representing a smaller and smaller proportion of your business over time? Are you looking to make up your client base from multiple, medium-spending, clients or from fewer big orders with longer contracts? Would it benefit you to offer discounts to incentivise repeat business or to recruit new clients?

Incorporation

Legally and practically, you must define the sort of business you are, or want to be. As growth ensues, it becomes appropriate to re-examine your business status – whether you should be a sole trader, partnership, or limited company. 

External support

During the start-up phase the proprietor becomes a jack of all trades, seeking advice where necessary, but bearing the brunt of the workload unaided. During expansion the rules change, and both practical and advisory help must be sought. As an expanding business, you will undoubtedly incorporate some new job functions within your organisation. Expansion will not however initially warrant full-time employment to cover all necessary functions, so some areas must be outsourced.

Consider which functions can be effectively out-sourced: 

• The accountancy, legal and financial functions.
• Marketing (including Internet services).
• Advertising.
• Technical support.
• Recruitment.
• Relevant production stages.

To help you make your decision, answer the following questions: 

• Who do you outsource to?
• How can their performance be monitored?
• Do you have any recommendations regarding their reliability and ability to carry out the job in hand?
• Who will you appoint internally to liaise between outsourced functions and the business?
• How cost-effective will outsourcing prove to be?

Outsourcing will ease pressures internally, releasing time to concentrate on primary objectives. However, a degree of control is relinquished and a degree of dependency on a third party is introduced, which must be managed effectively. To help minimise problems:

• Obtain written agreements and quotes.
• Set deadlines.
• Maintain communications.
• Re-evaluate your needs and reassess arrangements.
• Regularly review quality and standards.