The most frequent problem for many businesses is growth.
It’s not always easy to concentrate on generating revenues and profits for the current month and the current year while developing new markets and product opportunities which will keep a business healthy. Lacking a defined plan for future growth can put any business at risk and force it to respond to market and competitive changes. As John C. Maxwell so ably states; “Change is inevitable, growth is optional.”
Three Easily Identified Growth Challenges
1. Your Revenue is Slip-Sliding Away
The process of slowly going out of business due to declining revenues isn’t always triggered by a single event. But it can be, though, like it did with the onset of the COVID health crisis. It could be when a large new competitor emerges out of nowhere and shows up quickly and visibly in the market.
More often, though, this usually looks like a small series of year-over-year revenue declines. Management’s attention isn’t always captured because there is often the attitude that these revenue declines are the result of something small to be fixed or only temporary.
Takeaway: Deferring the effort to get to a deep understanding of why your business is underperforming only serves to make the challenge worse. Be bold, dig deep!
2. Your Business is Marching in Place
Another easily identified growth challenge is stagnation—generating the same revenues year after year and not being able to break out. Lethargy is often the enemy here, as consistent revenues aren’t all that bad, are they?
Consistency can be good, but eventually, something material will happen, and a great track record will break down. Acquisitions that steal larger customers can occur. A business’s major customers can find alternative suppliers because even though they appeared “satisfied”, they really were not loyal. When these risks occur to a consistently performing, but not growing, business, CEOs might find that they’ve lost their “growth muscle” and have no ideas, processes, or people to replace lost revenues.
Takeaway: You’ve got to start somewhere. Try identifying an adjacent growth opportunity that doesn’t require a lot of investment. Maybe a partnership with another related product provider?
3. Too Much Concentration, Too Little Diversification
This growth challenge often resembles the stagnation scenario but could be masked by short-term growth which appears inconsistently. This may seem like a godsend but can actually put a business at enterprise risk.
Concentration can come from too few customers in too few markets. Riding a new customer relationship up with rapidly increasing revenues can be exhilarating, but riding them back down is not fun at all.
Customer concentration really puts the whole business at risk. CEOs might invest too much operationally in supporting these relationships, and at the same time decrease marketing and sales programs because they think these are no longer needed. If a business has customer relationships without long-term commitments, it is especially vulnerable.
Takeaway: Identify one area for diversification and set a goal to at least enter that one market in the next 12 months.
Two Surprising Growth Challenges
These two growth challenges are often less visible but represent additional challenges that fall into the category of “accelerated” growth.
1. Growing but Losing Market Share at the Same Time
Some businesses are happily growing two or three percent annually. They’ve done that ongoing and feel they can stay healthy at that rate. In isolation, annual two or three-percent growth may very well work for them. But what if the market is growing at a faster pace?
Understanding the fundamental profiles of the markets a business is in or wants to be in, is critical to mid- and long-term success. If a business is growing nominally, but competitors and the market are growing faster, they are losing market share. Two or three percent doesn’t look so good when your market is growing at eight to ten percent.
The implication of losing market share is that, over time, a business can become such a niche player that it’s not a viable option any longer. CEOs need to ask, “What are our competitors doing that we are not?” Are they innovating services, products, or forms of customer engagement? That will ultimately mean that a business is no longer considered a “table stakes” player. And when a CEO wants to innovate to grow faster, they may find that they do not have the capital or time to do so.
Takeaway: Compare the cost of obtaining market share now versus what it may cost when the economic tailwinds start, and both you and your competitors are equally advantaged.
2. Growing on a Record Year
This growth challenge is not as common but represents the biggest growth challenge. Here’s the scenario: a business just came off a record year, and before the team even gets time to celebrate, the board or owners of the business say: “Great year! Fabulous job! Now, what can you do to double the business?”
One might be caught off-guard by this new challenge because it can be tough. First of all, a business must look at why it had a record year and what it did to make that happen. Were those one-time events, like a competitor having to pull a product because of a recall issue? That’s something that won’t happen every year.
Doubling in size becomes an enterprise challenge because in addition to a strong, validated growth plan which prioritizes and models all growth opportunities, the operational challenges of scaling a business 100 percent, even over a few years, are huge. Linking growth plans with the required investments is an exercise that aligns marketing, sales, capital requirements, and operational planning. It’s an “all-in” effort with its concurrent risks.
Takeaway: You’ve done something right to have a record year. This is the time for creative identification of other opportunities to keep your momentum. Try a formal growth planning exercise.
Whatever growth challenge you may have and whatever growth scenario fits your business, you need a plan. The best businesses think of “engines of growth,” which are sustainable plans for growing business over a three- to five-year planning horizon.
Here’s a link to a free eBook that describes a healthy planning process for all five of these growth challenges.