Geared up for growth?

Often management teams are too close to problem issues and may, in some cases, be the problem themselves. Seeking timely advice and acting on it can sometimes make the vital difference between future growth and success or financial collapse.At this time in the economic cycle, larger companies may also be targeting similar markets in the pursuit of further growth. Therefore, it is vital to concentrate on retaining existing customers and to continue focusing on the USPs of the business. Delivering quality goods or services will not only reinforce existing relationships but also attract new customers.Planning for the long term – forecasting in the short-medium termLong-term planning is easier said than done, especially so if business owner/managers have been focusing on running their business day-to- day and fire fighting cash pressures. Strategy can often end up being pushed aside.If a SME has survived the last couple of years then it has already achieved a great deal. It is often the case that business failures are more prevalent entering a recovery phase when access to and the management of cash and working capital are key to both survival and financing growth.Tackling external market challengesProducts or services that sustain a small business are not necessarily able to generate sufficientturnover and/or profits for a larger enterprise. Therefore, it may be time to stand back and re-assess the unique selling points (USPs) of the business and also to research and understand both new and existing markets. It is important to question what competitors are already doing and if growth can be better achieved organically or via acquisition (often out of distress), if indeed it is the objective or right time to grow at all?Therefore, it may be time to refocus the business plan to longer-term growth rather than survival. Moreover, the plan should be sustainable and revisited regularly. Looking further ahead than two or three years, whilst desirable, is extremely challenging in a continually uncertain economic climate.Robust forecasting is essential. Budgets can often be vague and focus solely on driving top-line turnover, perhaps based on the hope factor rather than the current financial position and desired progress of the business.Consequently, timely and regular re-forecasting using performance benchmarks can enable management to maintain a strong grip on how the business is performing and this will enable them to demonstrate their financial control to key stakeholders, in order to minimise any unpleasant surprises.Forecasting should also focus on the cost structure of the business, both variable costs and the impact on gross margin, and overhead costs and the impact on bottom line. A profit improvement plan is an essential part of any business strategy but one that is often overlooked.Flexibility of approach and goalsTo constantly re-assess and re-calibrate any business requires flexibility on the part of management. Owner managers, in particular, can often adhere to the way they have always done things, resisting change and focusing on short-term micro management rather than thinking strategically for the longer-term future development of the business. This requires a clear focus on ultimate objectives. The goal for many business owners, if not to prepare for the next generation, is often to sell the business eventually or at least realise capital, perhaps on retirement.As such, setting long-term goals also means considering who will run the business if and when the incumbent owner/manager steps aside. A succession plan for him/her and for key senior management members is vital in ensuring that the interests of all stakeholders can be properly taken care of on a continuing basis. Similarly, ’what if?’ questions need to be considered for the same reasons. Having contingency and scenario plans in place can help reduce the impact of future unknowns and having insurance in place can offer protection against future potential financial loss.Management structure – re-assessing the skill setBeyond a certain point, it can become clear that owner/managers may need help. It may fall to advisors to point out that a business needs additional skills. Moreover, the idea of putting a management structure in place may be a new concept to a business that has grown from a small team and added staff in an adhoc manner. Utilising the existing team and adding new skills and capabilities to best advantage requires acceptance of change to introduce a fresh approach. This ensures that the business as a whole works as effectively as possible, and is able to evolve as the external market does.The management structure will need to be flexible and develop as the business grows. For example, it may be necessary to bring in interim managers such as a finance director until the role merits a permanent, dedicated member of staff. This is particularly important in convincing funding providers that the business has a sufficiently strong finance function to be able to manage the business as it develops with their financial backing.Delegation will become increasingly necessary. If the business delegates to the right person or financial adviser, it may free up management time to become more positive and forward-looking. This may also ensure that the business follows the advice that it has been given. Business owners may seek advice but when it comes to implementing it, particularly where it requires investment, they can often fail to follow through. As mentioned earlier, what underpins strong management skills is timely and accurate management information.The cost of new investment in plant and machinery, in systems or in people needs to be understood in terms of how it feeds through to the profitability of what the business does. Simply driving top-line growth is not enough. Retained profits are a key element to generating sufficient cash for organic growth and/or acquisition.Financing for the futureStrong, well-managed businesses that can regularly demonstrate management control and a sound business plan, have always been able to raise finance. This remains the case in the current, post financial crisis environment.Evidence that a business can service any additional funding it takes on is top of the agenda for banks. Moreover, banks in particular are more focused than ever on pricing funding applications brought to them in accordance with perceived risk.This will remain the case as the additional bank funding under the Project Merlin initiative comes into play. This scheme will result in £190 billion of lending to businesses during 2011, of which £76 billion has been allocated to SMEs. The results of the current banking review, as well as anticipated interest rate rises and the impact of inflation, will only compound funders’ emphasis on quality business management, plans and controls when it comes to approving credit applications.In short, achieving growth in SMEs depends on the strength and depth of skills and capabilities of management, across every aspect of the business. Being able to demonstrate those skills to all stakeholders breeds confidence which, in any post-recession recovery is crucial. In the aftermath of the financial crisis, it is confidence that has been severely damaged and is still deeply bruised.See more on Corporate restructuring