Managing a Growing Business
Managing a Growing Business
Stages of Growth
Entrepreneurial businesses go through distinct stages of growth, with each stage requiring different management skills.
1. Start-up – In this stage, the main problems are producing the product or providing the services and obtaining customers. Key issues facing managers are: Do we have enough money? Will we survive? Can we get enough customers? Many Internet companies are still in the start-up stage.
2. Survival – At this stage, the business has demonstrated that it has a workable business entity. It is providing a service and has sufficient customers. Concerns here have to do with finances—generating sufficient cash flow to runt he business and making sure revenues exceed expenses. The enterprise will grow in size and profitability during this period.
3. Success – At this point, the company has a solid base and is profitable. Systems and procedures are in place to allow the owner to slow down if desired. The owner can stay involved or consider turning the business over to professional managers.
4. Takeoff – The key problem here is how to grow rapidly and finance that growth. The owner must learn to delegate, and the company must find sufficient capital to invest in major growth. Properly managed, the company can become a big business. However, another problem for companies at this stage is how to maintain the advantages of small business as the company grows.
5. Resource maturity – At this stage, the company has made substantial financial gains, but it may start to lose the advantages of small size, including flexibility and the entrepreneurial spirit. A company in this stage has the staff and financial resources to begin acting like a mature company with detailed planning and control systems.
Planning
In the early start-up stage, formal planning tends to be nonexistent except for a business plan. The primary goal is simply to remain alive. As the enterprise grows, formal planning is usually not implemented until around the success stage. Planning means defining goals and deciding on the tasks and use of resources needed to attain them. Entrepreneurs have to define goals and implement strategies and plans to meet them. It is important that entrepreneurs view their original business plan as a living document that evolves as the company grows or the market changes.
Organizing
In the first two stages of growth, the enterprise's structure is typically very informal with all employees reporting to the owner. At stage 3, success, functional managers are often hired to take over the duties performed by the owner. A functional organization structure will begin to evolve with managers in charge of finance, manufacturing , and marketing. During the latter stages of entrepreneurial growth, managers must learn to delegate and decentralize authority. If the business has multiple product lines, the owner may consider creating teams or divisions responsible for each line. The enterprise must hire competent managers and have sufficient management talent to handle fast growth and eliminate problems caused by increasing size. As an enterprise grows, it might also be characterized by greater use of rules, procedures, and written job descriptions.
Leading
The driving force in the early stages of development is the leader's vision. The vision, combined with the leader's personality, shapes corporate culture. The leader can signal cultural values of service, efficiency, quality, or ethics. Often entrepreneurs do not have good people skills but do have excellent task skills in either manufacturing or marketing. By the success stage of growth, the owner must either learn to motivate employees or bring in managers who can. Rapid take off is not likely to happen without employee cooperation.
Stepping from the self-absorption of the early days of a company to the more active communication necessary for growth can be tricky for entrepreneurs. You can never get anywhere if you're pulling your staff around behind you all the time. Focus more on employee needs and less on financial growth. Entrepreneurs have to make an effort to communicate with employees, conduct surveys to learn how they are feeling about the company, and find ways to involve them in decision making.
Your leadership style has to allow the company to enter the takeoff stage with the right corporate culture and employee attitudes to sustain rapid growth. Leadership also is important because many small firms have a hard time hiring qualified employees. Labor shortages often hurt small firms that grow rapidly. A healthy corporate culture can help attract and retain good people.
Controlling
Financial control is important in each stage of the entrepreneurial firm's growth. In the initial stages, control is exercised by simple accounting records and by personal supervision. By stage 3, success, operational budgets are in place, and the owner should start implementing more structured control systems. During the takeoff stage, the company will need to make greater use of budgets and standard cost systems to provide statistical reports. These control techniques will become more sophisticated during the resource maturity stage.
Managing a Growing Business - To learn more about this author, visit Rodney Burutsa's Website.
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Once a start-up business is up and running, how does an entrepreneur manage it? Often the entrepreneurial spirit of self-confidence, creativity, focus and control leads to financial and personal grief as the enterprise grows. A hands-on entrepreneur who gives birth to the business loves perfecting every detail. But after the start-up, continued growth requires a shift in management style. Those who fail to adjust to a growing business can be the cause of the problems rather than the solution. In this article, we will look at the stages through which entrepreneurial companies move and consider how managers should out their planning, organizing, leading and controlling.
Stages of Growth
Entrepreneurial businesses go through distinct stages of growth, with each stage requiring different management skills.
1. Start-up – In this stage, the main problems are producing the product or providing the services and obtaining customers. Key issues facing managers are: Do we have enough money? Will we survive? Can we get enough customers? Many Internet companies are still in the start-up stage.
2. Survival – At this stage, the business has demonstrated that it has a workable business entity. It is providing a service and has sufficient customers. Concerns here have to do with finances—generating sufficient cash flow to runt he business and making sure revenues exceed expenses. The enterprise will grow in size and profitability during this period.
3. Success – At this point, the company has a solid base and is profitable. Systems and procedures are in place to allow the owner to slow down if desired. The owner can stay involved or consider turning the business over to professional managers.
4. Takeoff – The key problem here is how to grow rapidly and finance that growth. The owner must learn to delegate, and the company must find sufficient capital to invest in major growth. Properly managed, the company can become a big business. However, another problem for companies at this stage is how to maintain the advantages of small business as the company grows.
5. Resource maturity – At this stage, the company has made substantial financial gains, but it may start to lose the advantages of small size, including flexibility and the entrepreneurial spirit. A company in this stage has the staff and financial resources to begin acting like a mature company with detailed planning and control systems.
Planning
In the early start-up stage, formal planning tends to be nonexistent except for a business plan. The primary goal is simply to remain alive. As the enterprise grows, formal planning is usually not implemented until around the success stage. Planning means defining goals and deciding on the tasks and use of resources needed to attain them. Entrepreneurs have to define goals and implement strategies and plans to meet them. It is important that entrepreneurs view their original business plan as a living document that evolves as the company grows or the market changes.
Organizing
In the first two stages of growth, the enterprise's structure is typically very informal with all employees reporting to the owner. At stage 3, success, functional managers are often hired to take over the duties performed by the owner. A functional organization structure will begin to evolve with managers in charge of finance, manufacturing , and marketing. During the latter stages of entrepreneurial growth, managers must learn to delegate and decentralize authority. If the business has multiple product lines, the owner may consider creating teams or divisions responsible for each line. The enterprise must hire competent managers and have sufficient management talent to handle fast growth and eliminate problems caused by increasing size. As an enterprise grows, it might also be characterized by greater use of rules, procedures, and written job descriptions.
Leading
The driving force in the early stages of development is the leader's vision. The vision, combined with the leader's personality, shapes corporate culture. The leader can signal cultural values of service, efficiency, quality, or ethics. Often entrepreneurs do not have good people skills but do have excellent task skills in either manufacturing or marketing. By the success stage of growth, the owner must either learn to motivate employees or bring in managers who can. Rapid take off is not likely to happen without employee cooperation.
Stepping from the self-absorption of the early days of a company to the more active communication necessary for growth can be tricky for entrepreneurs. You can never get anywhere if you're pulling your staff around behind you all the time. Focus more on employee needs and less on financial growth. Entrepreneurs have to make an effort to communicate with employees, conduct surveys to learn how they are feeling about the company, and find ways to involve them in decision making.
Your leadership style has to allow the company to enter the takeoff stage with the right corporate culture and employee attitudes to sustain rapid growth. Leadership also is important because many small firms have a hard time hiring qualified employees. Labor shortages often hurt small firms that grow rapidly. A healthy corporate culture can help attract and retain good people.
Controlling
Financial control is important in each stage of the entrepreneurial firm's growth. In the initial stages, control is exercised by simple accounting records and by personal supervision. By stage 3, success, operational budgets are in place, and the owner should start implementing more structured control systems. During the takeoff stage, the company will need to make greater use of budgets and standard cost systems to provide statistical reports. These control techniques will become more sophisticated during the resource maturity stage.
Managing a Growing Business - To learn more about this author, visit Rodney Burutsa's Website.
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Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
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