Planned Growth Creates Solid Growth

August 22, 2017

Solid growth in a small business does not happen by accident. Like any large, highly organized business, a small business or SME must plan not only for the very near future but for the intermediate future, as well. While a large, publicly traded company can easily plan for long-term growth, smaller businesses realistically might only plan for one, two, or three years into the future. Regardless of the timeline, it is planning and the thought and analysis that goes into the planning that is important.

Although small business owners are notoriously optimistic about the future of their businesses, they must take prudent steps to ensure the optimism becomes reality. Overall, small business and SME owners are big dreamers; otherwise, they would never have ventured into small business ownership in the first place, but solid growth is more about planning than dreaming. Realistic goal-setting allows an owner to judge performance over time and make changes when necessary to achieve intended goals.

Realistic planning coupled with the ability to meet commitments to customers, employees, and other stakeholders creates success. Risk is created, however, when a business accepts more business than it can efficiently handle. Although a small business might have experienced a phenomenal growth curve in the past with excellent execution, it cannot automatically be assumed that the business can continue on the same path indefinitely without solid planning. While resources may have been adequate or, even underutilized, at the onset of the business, those same resources might one day reach their full operating effectiveness. Suddenly, a small business might find that its growth cannot continue without an influx of additional resources...employees, physical location capabilities, additional vendors, and financial capital...all needing a certain amount of planning. 

Consideration must be given to all facets of the business when planning: 

Budgets and cash requirements: Prepare short and medium-term master budgets including cash flow budgets

Human resources: Plan for the number of additional employees needed, salary and benefit projections, succession plans if key employees leave, skill-needs projections, and training plans

Fixed Assets: Consider additional, necessary fixtures and equipment including replacement of current fixed assets

Building: Decide if current location, whether owned or leased, has potential for expansion

Technology: Assess hardware and software needs to handle increased business, improve efficiency, and increase output

Supply chain management: Integrate an effective SCM throughout the entire business

Vendors: Prepare for vendor expansion to handle increased volume of raw materials and inventory, planned quantity cost savings, contingency backup plans with alternative sourcing opportunities should some vendors not be available to handle planned needs

Marketing: Understand full market potential, target segmented markets, and explore all marketing opportunities

Research and development: Ensure there is adequate R&D depending on the type of business

Capital structure: Plan for debt and/or equity financing as needed for growth

As a small business grows, it can quickly outpace its internal resources. It is critical to constantly assess strengths needed for expansion and how to improve upon inherent weaknesses that can limit growth. A key ingredient for successful small business growth is planning in all functional areas rather than just in one or two functional areas. Ultimate growth cannot occur when one area of a business is ready for the future but other areas are not. Planning and supplementing required resources in all areas of a business early in the growth process lays the foundation for solid, future growth rather than interrupted growth due to inadequacies in one or more areas.