Growing succesfully for small and medium sized business

Those who expanded their business and make a lot of profit have these common attributes:

1. Know what they are growing.

They know the business model of what they are growing. They are clear that the business model that they are expanding is the model that have proven to make money. They grew income, not size. Growing your previously mostly retail, personalized business by investing heavily on project-based business has much lower chances of success as it is a new business model and has to be given time to mature.
 

2. Grew the customer base first

They expanded the customer base of their existing model by making their product better and reachable by many more. This would involve increasing the delivery channel to the customers as well as retaining more customers. Growth companies would focus more on retaining customers and the acqusition of new customers would be done indirectly by old customers.

Buying more stock and machinery is an expansion of size and cost - only worthwhile if you have the staying power and able to grow your demand to capitalise the resources.

3. Improve margin first, then numbers

Successful growth stories are about increasing profit margin by adding value propositions to the products and nurturing customer loyalty. Apple products do not shed price to capture, it constantly improves its products and increases/maintain its margin.

4. Leverage

They leverage on other people's resources. They do not expand solely by using their money or borrowings (borrowings is not necessarily other people's resources, it is merely your future resources). They expand by having smart partnerships and sub-contracting

5. Hold resources later and separate

Only when they have reached a critical mass do they expand to hold resources, raw materials. But the expansion is normally done through a different company because the business model and risk element is totally different from the original production-and-sales based business model.

6. Strong financial feel

Small and medium sized companies are very cashflow sensitive. Successful gworth stories always have an entrepreneur who has a strong financial feel for her company and able to detect possible cashflow problem before it happens. Strong financial feel also include being able to identify the cost/revenue mis-match as well as fraud loopholes. Weak financial feel would sink a company faster than a ton of brick in a lake.

7. Strong system and control

The existing business model must be robust and the key variables in the expansion/growth must be under absolute control of the entrepreneur. Any uncontrolled elements, such as pricing, delivery or product, which is left unmitigated (like insured and product liability clause) is a disaster waiting to happen.

8. Rely on professional

Big business cannot be run/operated like a small business. There is a reason why big companies hire expensive accountants and managers to work for them- because the nature of big business require them. Growing big without proper advise and support is not advisable at all.

9. Treat expansion plan like a start-up

Do invest and grow, but go through the process. And have plan B. If your expansion plan consumes so much resources that do not have room plan B, think ten times before you do it. In most cases, the expansion imploded.



Work smart everyone


The Author is the principal of ElixirEducate - a training house for Smart Entrepreneur Program Series. He was an international investment banker, corporate financier and now serial entrepreneur and business coach. You can find more information on ElixirEducate on their facebook page, here.  And be a facebook friend  of Yazdi . Please share this information with your entrepreneur friend who may benefit from this post. They could be an existing entrepreneur or someone who plans to start a business.  You can also join the growing business network of Entrepreneurs in Malaysia by joining this group. Thank you.