Business owners, CEOs and presidents are always looking for business growth strategies. The key to success is to grow,grow grow! In the old economy mistakes made while growing were more forgiving so even poor business growth strategies often were rewarded. However, things are different in the New Economy. A poorly designed or poorly executed growth strategy can be terribly costly.
One of the biggest mistakes with business growth strategies is growing beyond your company’s means because it’s like going on vacation without cash or credit cards. Neither will turn out to be a pleasant experience. This may sound like common sense but common sense isn’t always common practice. One of the top reasons for small business failure is lack of capital. And if following this principal was universally applied in larger businesses, why did we have to bail out the auto industry and the banking industry? In fact, of the 150+ major businesses that failed in 2008 and 2009 most were due to bankruptcy. (Wikipedia)
Some companies struggle because their eyes are bigger than their wallets. For example, a $5 million tech firm had enjoyed steady double-digit sales and profit growth selling non-core technology to small businesses. In late 2011 the company jumped at the chance to bid on a large project for a mid-sized business for their core technology. They were ecstatic when they were awarded the business and high fives were given all around. However the euphoria quickly turned to angst when the CEO realized the project would consume most of their resources and cash flow for the next 6-9 months. Although the project would eventually be profitable the company had to take extreme measures to survive the implementation, including laying off personnel and putting a halt on new business development. The long-term viability of the company is still in doubt.
Spending and committing resources as if the road will always be straight and narrow is inviting disaster. Cash must be managed as the precious resource that it is instead of the endless supply people thought existed before the start of the Great Recession. At that time, much growth was fueled by the desire to grow and the availability of money. In the New Economy credit and cash have tightened up and demand has fallen off in many markets. This means unless you have money to burn don’t pursue business growth strategies in a market that doesn’t have demand or you can’t uniquely and effectively service. At least not right now.
Bob Hamilton Group President for ITW put several initiatives in place that helped his organization recover rapidly from the downturn they experienced in 2009. Among the actions taken, ITW:
- Restructured several businesses to get their cost structures in line with the marketplace.
- Assessed their various global markets and put resources where they saw growth and put growth plans on hold where markets were stagnant.
- Improved working capital by managing receivables and inventory.
- Implemented programs to increase cash flow.
These actions helped ITW implement business growth strategies in targeted markets and realize a 15% growth rate.
Do you have the financial resources to support your growth initiatives without putting the company at risk? Find out how your company’s growth strategies stack up by taking the Growth Positioning Survey FREE.