Is Growth always the goal to go for?

Is Growth always the goal to go for? According to the media and the standard conversation at networking events, you’d think this should be the ONLY focus for any business owner. As Business Growth Accountants, with lots of tools and experience to help businesses grow, you may expect us to agree.

You may be surprised!

Talking to someone recently, we were asked whether he should follow the advice of a business coach. Their suggestion was to push for a 40% increase in Turnover during the nine months remaining in this financial year.

The Current Position

Ordinarily, this could be achievable, BUT there are a few other considerations in this situation which made us think otherwise:

  1. Significant staff changes have left the team down in numbers and experience. These were all due entirely to personal circumstances so were wholly unexpected and unavoidable, but have drastically reduced the ability of the people who will actually be doing the work to generate fees.
  2. The industry appears to be stagnating. Sales have slowed for the company as well as their competition and their partners. Sales over the last few months have been lower than the seasonal norm.
  3. As a result of reduced sales, cash flow is tightening. The business has cash reserves but is reluctant to see these reduce.
  4. The Directors have been working flat-out for the last two years. Though they’ve seen the benefits in terms of collateral produced, they’re feeling jaded and overwhelmed.
  5. The company’s financial year is already three months old, so any target for the remaining months is increased further to take account of the missed months.

In these circumstances, pushing for an increase of 40% in Turnover over the remaining nine months of the financial year could be disastrous.

The Plan

Our suggestion, given the above, would be to focus on consolidation.

  1. There was already a plan to bring in an additional member of the management team, which will now become a priority. Having this key recruit in place will reduce the burden on the Directors. This will free them to concentrate on building new relationships within their vertical markets. These relationships bring in work, and in a possibly constricting market having more introducers would become key.
  2. Take the time to identify one other recruit to bring the team back to strength and spend time on bedding those team members in properly. Establishing and fulfilling their training and development needs will ensure they are confident and capable of maintaining the high standards clients expect.
  3. Focus on increasing profit rather than turnover, and ensuring that Directors remuneration recovers from the currently straitened figure. Initially this will be by reviewing and reducing costs, as well as by improving efficiency, but by avoiding the additional costs of expansion increased pressure on existing income and reserves will be avoided.

The Rationale

By putting these plans in place over the next few months, and implementing them with a steady hand, the pressure on the Directors will be lessened. Their motivation and morale will then slowly return. The team will feel more confident and comfortable within the stronger business, which in turn will be more resilient if the market continues to constrict. If it doesn’t, and the market recovers, the business will be primed to respond. It’s well built team, good financial shape and a motivated leadership team will be ready to take advantage of the opportunity.

Is Growth always the goal to go for? In short, no it isn’t! It can put huge pressure on cashflow as well as the people within the business, particularly if that growth is targeted in turnover rather than profit terms. If a business is carefully positioned in advance though, controlled and considered growth can be a fabulous goal to aim for.

To find out more about positioning your business for safe growth and how we can help with the process, get in touch.

 

 

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