Tuesday, July 3, 2018

Why don't many small businesses achieve the growth they want?

Is Sales the most important activity to grow the business? We can't disagree that its the only function that gets revenue. But should every business owner focus on the sales first, to increase the amount of business and achieve that elusive growth every year?

Apparently, this looks good enough. If you increase sales, you get more money and so your business ought to grow. In reality, nothing can be far from the truth. Sales is a key function, but may not be the one that holds a business back from getting to it's growth targets.

Let's look at what happens when we look to get more sales. We set higher sales targets. If we have the manpower to go for it, we rush for it. If we don't have the manpower, we hire more people or appoint sales associates, dealers, agents etc.

Let's take the first case, where we have adequate manpower to get more orders. So we bring more orders with some delivery commitments. What happens down the line? Pressure on procurement, production / execution and delivery, billing and follow-ups, all increase simultaneously. We can  again assume that all the subsequent processes have adequate buffer to accommodate the increase in demand. Would it now be possible to meet the commitments? Only if we had zero outstanding deliveries from all previous orders. Does this sound realistic anymore, despite presuming too many coincidences for the preceding situations? It doesn't. So we fail to deliver the increased orders in time. Next time, the orders are wither delayed or withdrawn and we are back to square one.

If at the start, we believed we needed additional manpower and resources, what would have been the outcome?

We would (with lot of hesitation and budget constraints) look for more people. Hiring right would be a big challenge for a small business and could take a considerable amount of time. Normally in absence of standard recruitment policies in small businesses, arbitrary decisions would be taken. Many a times we could give up after repeated hiring attempts do not yield satisfactory results. Back to square one again!

In the above situation, if we somehow manage to hire the right people, what happens next? We want them to get going and start selling, right? How many times does it happen that way? In our eagerness to get to higher sales levels, we forget that the newcomers need to adapt to our work environment, culture, etc. Many a times, they are unable to adapt and the desired outcome is not achieved. Even if they adapt well and sell as we desired, we could get stuck down the line if we didn't plan and prepare the subsequent processes as already discussed in the first case.

Then, is there no way to solve this puzzle for the small businesses? There sure is!

Business owners must accept that resources, including their time are limited. Even if they have sufficient money, they would only have limited time to oversee and ensure all the actions and changes simultaneously.



They need to focus their attention on one thing at a time. Only one thing. But which one thing? The business owners need to determine the one thing that can produce the most impact to their growth. The thing that is holding back their growth. Goldratt's TOC gives us a wonderful approach to deal with this focusing challenge. The figure above shows how the businesses should go about for improving focus and achieving an ongoing growth.

The approach is effective, prevents wastage of resources and gets businesses moving towards growth.