Tag Archive for 'business growth'

Eight questions and four fallacies about business growth

Giant sequoia redwood trees grow very tall. Bradford pear trees, not so much. It’s all in the genes.

But there’s no genetic code for a business. While a Bradford pear can’t decide to compete with a redwood, a business can become whatever its owner makes it. And that last fact creates two questions we go to sleep asking ourselves and wake up trying to answer:

1. Should I grow my business?
2. How big should I grow my business?

In his book, Warp Speed Growth, my friend and Brain Trust member, Peter Meyer, lists four fallacies of growth which every business owner should consider. Here they are, each followed by my comments.

Fallacy 1. You can grow out of organizational problems.

In a state of denial or ignorance, small business owners sometimes think getting bigger will fix management and organizational shortcomings. If a tree is bent, fertilizing it won’t make it grow straighter – only faster in the wrong direction. If you have organizational challenges, don’t grow until they’re resolved.

Fallacy 2. Growth equals profitability.

Yes, increased sales volume can help you improve vendor discounts and therefore, gross margins. But that doesn’t mean your organization can manage the extra activity well enough to convert discounts to the bottom line. One of the rudest awakenings an owner can have is when projected sales growth is achieved, but profit is no better, or perhaps worse, than a period of lower sales. Remember Blasingame’s Growth Razor: “It’s not what you make, it’s what you keep.”

Fallacy 3. Profitability improves when every customer is yours.

Being the market leader is overrated. Peter cites research showing only 29% of market leaders were also profit leaders. Not only are you not going to sell every customer, you don’t want every customer. Many customers, and some customer profiles, aren’t profitable. Remember, you don’t spend sales.

Fallacy 4. If you grow, customers will benefit.

Peter says focusing on growth is focusing on yourself. Every minute your company focuses on itself is a minute diverted away from focusing on the customer. One of the classic examples of a company’s self-absorbed focus on growth is when it uses the term “fastest growing” in marketing material, as if this benefited customers. What makes you think customers don’t like the size that you are? What makes you think they’ll like your next size?

Don’t get me wrong: I’m the last person to say growth is bad, or that you should be happy with the current size of your company. I’m a capitalist, and capitalists LOVE growth. But I do encourage you to make sure that when you grow, it’s because you’ve thought about why and how. Here are six growth reality checks, each followed by a slap-in-the-face question to ask yourself.

• The marketplace is pretty full already. Is there a real opportunity to grow?

• Growth requires capital. How will I fund the growth I am planning?

• The rewards of growth are typically delayed. Can my organization wait that long for the payoff?

• Growth takes a company into unfamiliar operational territory. Do I have the staff and systems to blaze that trail without creating a casualty list?

• Being a business owner should be a source of happiness. Will I be happy with a larger business?

• Every business has corporate values, good or not so much. If our values are good, can we scale them? If they aren’t, why would we scale them?

Ask the growth questions and answer them as Polonius instructed Laetres in Shakespeare’s Hamlet: “This above all, to thine own self be true.”

Write this on a rock … Just because you can grow your business doesn’t mean you should.

Six steps to grow your business with referrals

Do you have enough customers? Here’s a better question: Do you have enough of the right kind of customers?

Do you agonize and strategize over the marketing plan you’ve designed to position offerings in front of your profile prospect? What’s the right message, platform, frequency, etc.? And do you then pray that the precious cash you’ve commit to marketing crosses over that pivotal line from expense to investment?

Agony and prayer; not a great strategy, right? But if this sounds familiar, you’re in good company. Marketing legend, John Wanamaker (1838-1922) once lamented, “Half of my advertising budget is wasted; I just don’t know which half.” It’s true, marketing metrics have come a long way since Mr. Wanamaker’s time, but that emerging science has been somewhat marginalized by increasing pressure from the digital marketplace. Indeed, getting customers on the proverbial dotted line is still challenging in the 21st century, especially for small businesses.

Beyond marketing, perhaps the primary reason for our customer acquisition challenge can be attributed to a human trait that’s at once primordial and unfortunate: We make things harder than they have to be. There are many examples, but arguably one of the most dramatic is also one of the simplest to fix: failure to ask for referrals.

Business referrals are now, and have always been there for the picking. And they’re as old school fundamental as they are new school relevant. So why don’t more people take advantage of this low-hanging fruit? It’s that can’t-get-out-of-my-own-way thing. Too many salespeople and organizations don’t have a referral strategy and teach referral practices.

Even though getting referrals is fall-off-a-log easy, there are specific practices to follow. Here are six I recommend to help you get started with your strategy.

  1. Spend as much time developing a referral strategy as you do a marketing strategy. When you do, two things will happen very quickly: you’ll gain new customers you weren’t getting from marketing, which will take performance pressure off of your marketing plan.
  2. Identify existing customers who like what you do. Each one is that valuable asset called a center-of-influence (COI).
  3. Explain – in person – that you need their help and how they can help you. For example: “Mr. Smith, thank you for your business over the years. We’d like to have more customers like you. I’m sure you ask your customers for referrals, and would like to ask if I may do the same with you.”
  4. Ivan Misner, founder of Business Network International (BNI) furnishes the next critical question: “Who do you know who …has your high standards?” “…uses the products we offer?” “…you would like to help do business with good companies like ours?” (Your “Who do you who …” here.)
  5. When you get a referral, thank the COI profusely before, during and after the subsequent contact, especially if you get the business. One thing I always say to my COIs is, “If a referral is a friend (or customer) before I contact them, I promise they will still be after I talk with them.”
  6. For millennia, business referrers have been paying it forward. As Ivan Misner says, “Givers gain.” The best way to have a sustainable referral strategy is to be an active referrer yourself. It’s much easier to ask someone for a referral to whom you’ve just given a referral.

If you’re still not sold on referrals, look around and you’ll see many successful businesses that grow only by referrals – essentially no marketing. There’s one primal reason why referrals can be more productive than marketing: People are hard-wired to want to help other people when they’re asked.

Get out of your own way and make a full commitment to creating and executing a referral strategy.

Write this on a rock … Referrals are low-hanging fruit just waiting for you to harvest.

Business Growth: An Irony in the Marketplace

Here’s a scenario that plays out in the marketplace every day in Small Business, USA:

“My business is really growing these days,” a small business owner confides to his friend, “but we’re still experiencing negative cash during the month.”

And then, with that deer-in-the-headlights look on his face, he completes his concern, “I thought by now, with sales and profits up, cash flow would be the least of my worries. I used to be afraid I couldn’t grow my business; now I’m worried that our growth will collapse it.”

This entrepreneur’s lament is one of the great ironies of the marketplace: A small business in danger of failure as a result of extreme success.

Beware Blasingame’s Razor: It’s redundant to say, “Undercapitalized small business.”

This maxim is especially true for growing small companies, because sales volume growth depletes cash in two dramatic but predictable ways:

1. When the business is growing, organizational upgrades are to be expected in order to handle the new demands ­ new vehicles, staff, technology, etc. Of course, you must fund these things, often while the exciting new sales growth is merely on paper, and not yet in the bank.

2. Selling to customers on an open account - where payment for work or products is collected after delivery - is essentially making loans to customers. And while it’s true that your vendors may let you do the same, typically they allow you less time to pay them than you allow your customers to pay you. This difference between when you pay and when you collect mathematically creates negative cash.

Here’s how to manage these two challenges:

1. Growth plans must be compatible with the ability to fund that growth. Too often we think that the big growth hurdle is to get customers to say yes. But we must consider the impact of sales growth on cash flow before delivering a proposal. And don’t be surprised if the answer to this equation shows that you actually have to turn down some business.

2. Don’t use operating cash to fund acquisition of capital assets that have a life expectancy of more than 2 years. Capital purchases should probably be funded by bank debt, and the interest you pay is the wages of Blasingame’s Razor.

If you don’t like debt, or paying interest, that should motivate you to leave profits in the business as retained earnings, which is ultimately the best way to overcome Blasingame’s Razor.

3. Do a better job of collecting receivables on time. Understanding the relationship between Accounts Receivable Days and Accounts Payable Days is an “ah-ha” moment for any small business owner. Sustained growth cannot happen without continuous and regular monitoring of this ratio.

Write this on a rock…. If your business is growing nicely, congratulations. But beware Blasingame’s Razor. It is possible to succeed yourself right out of business.

The paradoxes of successful business growth

One of the greatest professional accomplishments is to start a business and grow it.

But unlike a species of plant or animal, a business is not genetically preordained as to how big it will get. For a small business, that decision is made by the owners with answers to these three questions:

1.  Do I want my business to keep growing?

2.  How big do I want my business to be?

3.  How fast do I want to get to that size?

There are no right or wrong answers to these questions — it’s your business, you get to decide. But there is a paradoxical dynamic at play here: These answers are influenced by a natural law that it’s difficult for a small business not to grow. Here’s why:

  • Entrepreneurs are hard-wired to create more of the object of their desire.
  • The culture of the marketplace encourages, recognizes and rewards growth.
  • The marketplace is nothing if not competitive, of which the most prominent by-product is growth.

But even though there are no right or wrong answers to whether you should grow, there are wrong reasons. Consequently, you must make sure that when you grow your business it’s because you’ve thought about why and how. Remember, growth for its own sake is organizational suicide.

Here are six articles of faith you must believe to practice the religion of business growth, with each one followed by a tough love question from me.

  • The marketplace is pretty full already. What makes you think you have a realistic opportunity to grow?
  • Growth takes cash. What’s your capitalization strategy to fund your growth plan?
  • The ROI elements of growth are often delayed. If you grow, can your business operationally and financially wait for the payoff?
  • Growth will take you into unfamiliar operational territory. Do you have the staff and systems to blaze that trail without creating a casualty list?

And finally, here are perhaps the two most important growth truths to reconcile:

  • No one is less interested about whether you grow or not than customers. How do you know if customers will benefit from your growth?
  • Being a business owner should be a source of happiness. Do you know if having a larger business will make you happy?

Another paradox is that for every growth advantage there’s at least one element of growth baggage. Smart CEOs don’t start growth steps without coming to terms with both sides of this paradox.

Write this on a rock…Successful business growth is not genetic or accidental, it’s deliberate.

Video - Use the power of storytelling to grow your business

In this week’s video I talk about using the power of storytelling to grow your business.

Check out more of Jim’s great content HERE!

Take this week’s poll HERE!

Watch Jim’s videos HERE!

Use the power of storytelling to grow your business

Cogito ergo sum. French philosopher Rene Descartes proposed this idea in 1637, which translates to “I think, therefore I am.” Certainly the power of abstract thought is what separates humans from other animals.

Anthropologists now believe Homo sapiens succeeded, unlike other members of the genus Homo, Neanderthals and Cro-Magnon for example, because our brains had a greater capacity for speech and language. Today Descartes might have modified his philosophy to “I think and speak, therefore I am.”

In “Wealth of Nations,” Adam Smith proposed the written word as one of the three great human inventions. But long before humans were writing we were telling stories. And these stories – told, memorized and retold over millennia – became the headwaters of human development. We humans love to tell stories almost as much as we love to listen to them.

Another thing that’s older than writing is the marketplace. Long before Madison Avenue ad copy, merchants were verbalizing the value and benefits of their wares. Surely early business storytelling was the origin of modern selling skills.

In 1965, Intel’s co-founder Gordon Moore made an observation that became Moore’s Law: “Computer processing power doubles every two years.” But in his 1982 watershed book “Megatrends,” futurist John Naisbitt posed this paradoxical prophecy: “The more high tech we create, the more high touch we will want.”

So what does all of this mean? It means that in a time of rapidly compounding technology generations, the most successful businesses will consistently deliver high touch to customers with one of our oldest traits – the telling of a story. Here is Blasingame’s Three Cs of Business Storytelling:

Connect – Use stories to connect with prospects and convert them into customers.

Convey – Use stories to convey your expertise, relevance, humanity and values.

Create – Use stories to create customer memories that compel them to come back.

Storytelling is humanity in words. And since small businesses are the face and voice of humanity in the marketplace, we have a great advantage in the Age of the Customer. No market sector can execute the Three Cs of Business Storytelling to evoke powerful human feelings more than small businesses.

And regardless of how they’re delivered, stories don’t have to be long. I just told you five different ones in the first half of this article.

The Holy Grail of storytelling is when someone else tells your business’s story to others.

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On The Small Business Advocate® Show I recently talked about growing your small business with the power of storytelling. My segment dives deeper into the topic of maximizing the growth of your business. Click the link below to listen.

Grow your business with the power of storytelling - with Jim Blasingame

Check out more of Jim’s great content HERE!

Take this week’s poll HERE!

Watch Jim’s videos HERE!




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