As a business owner, a key objective is to see your business succeed in growing profitably. But to achieve this, it is important to understand what the factors are that really impact profitable business growth.
As with anything, there are a range of variables that influence growth potential. Access to finance, human resources, management skills, creativity and the ability to spot an opportunity can all truly drive profitability.
However, as a small business, where can you apply pressure to maximum effect? Which are the best levers to pull without wasting time and energy trying to do everything? Here are the four key areas that is recommended you to pay particular attention to when looking to grow your business.
1. Business structure and management
When you start out, your business is likely to be structured around you as the entrepreneur and your own abilities and resources. However, as the business scales and begins to take on employees in various business functions, that structure begins to mutate into something else.
In order to drive profitable growth, this structure will need to be reviewed and such decisions will impact the business’ goals and performance. Consider different types of structure – such as functional, divisional or matrix structures – and figure out which would fit your business best and drive the highest levels of performance. Bear in mind that clear leadership is fundamental, so ensure everyone in your management team is competent, effective and aligned.
Furthermore, as the business evolves, different structures may become more appropriate. Transitioning between structures is possible, but may require a level of change management so shouldn’t be taken lightly.
2. External factors
Whilst your business structure can be fully controlled, external factors that have a significant effect on your business’ success can, unfortunately, not be influenced. These factors include the cultural, political and economic conditions of the region in which you operate, but also such conditions at a global scale.
So while you don’t have control over these factors, what you can do is ensure you carry out regular environmental monitoring and market sensing to stay on top of market developments and understand how these will affect your business now, in the next few years and over the longer term.
Don’t limit this to your immediate market, as something that happens in a related (or sometimes even unrelated) market on the other side of the world can impact your business – and if you’re the first among your competitors to respond to this, there’s your competitive advantage.
3. Behavioural and personal traits
A business owner’s behaviour, personality and attitude can definitely impact the growth of the business. Your management ability and leadership style deeply affect the performance and outputs of the team, not to mention the retention of your best employees.
Furthermore, evaluate whether your capabilities – including education and training – are important in your industry sector, and recognise that your social capital influences your extent of access to resources.
Also, think about the ‘personality’ of the business. What is the culture like? To achieve success you need the right kind of people on board. This can happen through good recruitment practices, but also benefits from the ongoing training and development of your people.
Depending on your industry, location will have varying levels of impact on your business’ growth. While internet-based businesses may not feel the effects as much, retail and manufacturing, for instance, will notice the difference.
Where your business is based is going to affect the buoyancy of demand in the market on the one hand, while on the supply side, variation in the cost and availability of labour, premises and services will also be a factor.
Other factors to consider are ease of access for customers and suppliers, visibility among the target audience, branding associations (e.g. Paris and fashion, London and finance) and access to support such as industry clusters.
At Cranfield School of Management we have extensive experience and knowledge of what it takes to start and grow a successful business. With over 30 years of working with owner-managers of SMEs on the Business Growth Programme combined with world-class research in business and management, Cranfield is a leading centre for the development and training of business managers and their teams.
This article comes courtesy of Cranfield School of Management, leading centre for the development and training of business managers and their teams.