Day-to-day challenges of growing a firm

Growing business faces numerous challenges. As a business firm starts growing, many problems and opportunities demand different solutions - what worked a year before might now be not the best approach in the current context. Recognizing and overcoming the common risks associated with growth is essential if the business is to continue to grow and flourish. Essentially, a firm needs to confirm that the steps it takes today do not themselves create further problems for the future.

Summary

Growing business faces numerous challenges. As a business firm starts growing, many problems and opportunities demand different solutions - what worked a year before might now be not the best approach in the current context. Recognizing and overcoming the common risks associated with growth is essential if the business is to continue to grow and flourish. Essentially, a firm needs to confirm that the steps it takes today do not themselves create further problems for the future.

Things to Remember

Challenges that a firm faces during growth:

  • Keeping up with the market
  • Planning ahead
  • Cash flow and financial management
  • Problem solving
  • The right systems
  • Skills and attitudes
  • Welcoming change

 

MCQs

No MCQs found.

Subjective Questions

No subjective questions found.

Videos

No videos found.

Day-to-day challenges of growing a firm

Day-to-day challenges of growing a firm

Challenges of Growing a Firm

Growing business faces numerous challenges. As a business firm starts growing, many problems and opportunities demand different solutions - what worked a year before might now be not the best approach in the current context. All too often, escapable mistakes turn what could have been a great business into an also-ran.

Recognizing and overcoming the common risks associated with growth is essential if the business is to continue to grow and flourish. Essentially, a firm needs to confirm that the steps it takes today do not themselves create further problems for the future. Effective and impressive leadership will help the firm to make the most of the opportunities, organizing sustainable growth for the future.

The following are basic challenges that a firm faces during growth:

Keeping up with market:

Market research is not something that is done as a one-off during the start-up of the business. The conditions of business change continuously, so the market research should be continuous as well. Contrarily the firm runs the risk of making business decisions based on outdated information, which may lead to business failure.

The more the firm succeeds, the more competitors notice and react to what the leaders are doing. A market leader of one day may be no better than the average after some months.

Possibly loyal customers can be quick to find other suppliers who provide better deals of the products.

As service and products, sales growth and profit margins get compressed. Understanding where the products are in their lifecycles can help to work out how to maximize overall profitability of the firm. At the same time, the owner needs to invest in innovation or modification to build a stream of new profitable products.

Planning ahead:

The plan that made sense for the firm a year before is not necessarily right for a firm at present. Market conditions continuously keep on changing, so the firm needs to revisit and update the business plan routinely.

As the business grows, the strategy needs to evolve to suit the changed circumstances. For example, a firm focus is likely to change from winning new customers to creating profitable relationships and maximizing growth with the existing customers. The existing business relationships usually have greater potential for profit and can also provide satisfactory cash flow. Newer relationships may raise turnover, but the profit margins may remain or be lower, which may not be viable.

On the other hand at the same time, every business needs to be active to new opportunities. There are obvious pitfalls to relying solely on existing customers. Modifying the customer base spreads those pitfalls.

Continuing the same business model, but bigger is not the only path to growth. There are many other strategic options such as franchising or outsourcing that might provide opportunities for better growth.

It is important not to consider that your current success means that the firm will automatically be able to take advantage of these available opportunities. Every major move needs perfect planning in the same way as launching a new business venture.

Cash flow and financial management:

Control of the cash flow is important for any business firm. For a growing business, it's compulsory - cash restraints can be the biggest factor barring growth and overtrading can be mortal. Making the best use of the finances should be a key element in business planning and appraising new opportunities. With limited resources, the firm may need to pass up promising opportunities if following them would mean emaciating the core business of essential funding.

Each and every element of working capital should be carefully controlled to maximize the free cash flow. Effective credit management and strict control of overdue debts are very essential. The firm may also want to consider raising financing across trade debts.

Effective supplier management and good stock control tend to become progressively important as the business grows. Holdings of obsolete stock may come to be a problem that needs cyclic clearing up. The firm may want to work with suppliers to diminish delivery cycles.

Problem-solving:

Usually, new businesses run in perpetual crisis mode. Every new day brings new challenges that urgently need to be resolved and management spends most of their time in troubleshooting those problems.

As a business grows, this approach simply does not work. While a short-term crisis is always crucial, it may not matter closely as much as other things you could be doing. Spending the time calming an irritated customer might help prevent that one relationship, but focusing rather on recruiting the right person could lay the foundations of consequential new sales for years to come. As the business grows, the owner also needs to be alert to new priorities and problems.

For example, a business might be increasingly at pitfall unless the management takes steps to ensure their intellectual property is properly guarded.

If the proprietors are focusing on individual marketing campaigns, they might need to devote more resources to developing their brand.

The right systems:

All business produces and relies on large volumes of information - employee details, regulatory requirements, financial records, interactions with customers and other business contacts, and so on. It is too much to keep track of - let only use effectively - excluding the right systems.

Tasks and responsibilities can be delegated as the business grows, but without solid management information systems, the firm cannot be managed effectively. The larger the business grows, the harder it is to assure that information is shared and various functions work together effectively. Establishing the right infrastructure in place is an essential part of aiding the business growth.

Policies and procedures, documentation also becomes increasingly important. The informality that might work with one or some employees and a handful of customers naturally is not practical in a growing business firm. The owner needs effective employment procedures, proper contracts, clear terms and conditions, and so on.

Skills and attitudes:

Entrepreneurs are the driving force behind the creation and growth of new businesses. All too often, they are also the people building them back.

The abilities that can help an entrepreneur to launch a business are not the same as those they need to help it grow. It is important not to fool self into valuing the own abilities too highly. The chances are that a person needs the training to learn the attitudes and skills required by someone who is leading the growth of the business.

To grow the business, an owner needs to learn to be delegated properly, trusting the management team and giving up day-to-day govern of every detail. It's all too simple to stifle motivation and creativity with high interference. As the business becomes more complicated, the owner also needs to develop his/ her time management skills and learns to focus on what's really more important.

Welcoming change:

Complacency can be a major hazard to a growing business. Assuming that the firm will continue to be successful easily because the firm has been in the past is very reckless. Routinely revisiting and updating the business plan can help to remind the owner of the changing market conditions and the necessities to respond to them.

An up-to-date plan helps an owner to identify what action he/ she need to take to change the business and the way it runs/ operates.

An entrepreneur needs to be fully committed to the strategy, even if it takes him/ her out of the comfort zone. This can involve hard decisions such as making employees superfluous or switching business away from those suppliers who has become friends. But unless a firm is prepared to do this, the pitfalls are putting the business at an insecure competitive disadvantage.

Reference:

UK, B. L. (2009). http://www.infoentrepreneurs.org/. Retrieved from infoentrepreneurs: http://www.infoentrepreneurs.org/en/guides/the-challenges-of-growing-a-business---and-how-to-meet-them/

Baumol, WJ. (2004). Entrepreneurial enterprises, large established firms and other components of the free–market growth machine. Small Business Economics

Agrawal, Dr. Govinda (2014). Entrepreneurship and small business management in Nepal . KTM: M.K Publishers and Distributors.

Lesson

Start-up New Business Venture, Marketing Issues and Growth

Subject

Entrepreneurship

Grade

Bachelor of Business Administration

Recent Notes

No recent notes.

Related Notes

No related notes.