Growing a business is important. It provides opportunities for earnings for both owners and employees, helps more customers with products and services, and many other benefits. But growing a business takes more than a great idea and some capital. In fact, history tells us that two thirds of businesses fail within the first two years and that only about one-third of businesses make it to 10 years.
Smart Business spoke with Todd E. Crouthamel, CPA, director of Audit & Accounting at Kreischer Miller, about the many obstacles to growth in today’s businesses, their sources and how to address them.
How does hiring affect growth?
Many middle market companies find themselves hiring people when their revenues have increased and they need additional people, or in the event of employee turnover. This staffing plan is reactive in that companies are hiring because of a need. Reactive hiring often results in bringing on people who aren’t the best fit for the culture.
Hiring people who fit a business, when they are available, increases the chances of getting the right people, which in turn increases the chances that they quickly become productive contributors.
Retention is another issue. Employees want to be challenged, valued and feel they are making a difference. That makes employee engagement a critical element of high-performing companies. Components of employee engagement include making sure employees have the right tools for the job, and listening, giving them individual attention and recognizing their accomplishments.
What is it business owners might be doing that could stunt their company’s growth?
How business owners and leaders spend their time is important. Many business owners and leaders work ‘in’ the business, but to be successful, they should spend more time working ‘on’ the business. Business owners who are involved in every decision at their company, from pricing to who to use as a coffee vendor, are too far into the weeds, which leaves little time for strategic thought and planning.
Business owners eventually need to transition away from being so enmeshed in the day-to-day operations. Otherwise, they may have issues with transitioning the business to an inexperienced next generation, or face a reduced selling price in the event of a transaction.
Consider what tasks could be moved to other people within the organization and start freeing up time to be more strategic. If the right people are in the organization, they should flourish with these increased responsibilities. This change will then free up business leaders to lead and do more strategic thinking about the business.
What is the relationship between a company’s value proposition and its growth?
A value proposition is a statement that identifies measurable and demonstrable evidence of the benefits that a customer receives from buying a business’s goods or services. A good value proposition will clearly communicate what the product is, who it is for and how it is good for the user. The value proposition should be communicated to customers, but it should also be communicated internally and woven into each employee’s workday. It’s also the foundation of the company’s branding efforts and training programs. Having a continuous focus on the value proposition will help get everyone on the team working together on delivering the value the company has promised.
An unclear value proposition can stunt growth. Consider reviewing the value proposition by organizing a client advisory board or engaging a third party to conduct a customer survey to ensure that the company is focused on what is important to customers, and that the company is providing the value that has been promised.
Focusing on these areas of a business will increase the likelihood of success. While there are many other challenges to growth, careful consideration of these items should help take care of many other barriers at the same time.
Insights Accounting & Consulting is brought to you by Kreischer Miller