Growth Mode: Navigating the Choppy Waters
By: Karl R. LaPan, President & CEO, Northeast Indiana Innovation Center
Special Edition: This article was written by me for the Greater Ft. Wayne Business Weekly’s 2016 Small Business Survival Guide and is reprinted in my CEO blog.
As a business owner, you must find the sweet spots for funding, facilities, cash flow, pricing, labor workforce, etc. That last — labor workforce — can make or break a business venture. It’s your job to make sure you have the right people — and the right number of people — to keep your operation as efficient and sustainable as possible — especially during the venture’s formative development years.
Nearly 80% of all U.S. small business establishments employ no one other than the owner, so-called “solo-preneurs”. Going beyond the owner/founder — growth mode — is a big deal. Now let’s say your business is in growth mode, and you feel it might be time to hire additional staff to properly execute on your potential customer and market opportunities. How can you really be sure the time is right to bring in additional staff, hire independent contractors, or partner with other companies to fill in the gaps and get to the next level?
Remember growth isn’t always a good thing.
Later this year, new overtime rules go into effect and they may change whether you want to hire in-house, or work with a more flexible workforce of freelancers and independent contractors. Additionally, in-house-employee-related benefits (health care, retirement, and taxation) can take a big bite out of the budget. Consider these tell-tale signs:
- The sales of your “core” products or services have been increasing over time, and you identify the sales performance improvements as a positive trend — not a short-term blip. Be sure to know the difference between purchase orders and expressions of interest. You can’t go to the bank and deposit expressions of interest.
- You’ve done the research and you see a clear opportunity for growth and expansion in your niche or related industries. Bases on that, you decide that now’s the time to get in on the ground floor. But current employees aren’t available to take on additional responsibilities, or you don’t have employees at all (you’re part of the 80% we were talking about earlier). If you are unsure the growth is sustainable, outsource until you see strong evidence of the demand you expected.
- Your employee’s existing job skills and knowledge meet the company’s current level of productivity. But in order to expand, you’ll need to acquire staff with new and different set of skills and knowledge. You might consider WorkOne’s worker training programs, local recruiters, staffing companies, or university internship programs as potential resources for qualified people.
- Revenue is at or above target and all signs point to a continued trend and the revenue is converting to cash giving you the self-funding you need to make strategic investments including hiring permanent team members.
While there are no hard and fast rules, if the market potential is opportunistic or short-term in nature, you may consider outsourcing either to independent contractors or a third party. If there is strong evidence of proven market demand that materializes over time, it just might be time to add an employee. However, if you decide to take the plunge and hire/outsource the talent, you need to decide what you’ll do get the most out of your investment. Here are some tips that will help make the plunge more successful:
- Set “tangible” milestones. Set some measurable performance milestones for determining what money you will invest, when you will invest it, and what you want to see in sales to continue to invest. Set triggers for when to pull the plug if the money is chasing a premature market opportunity.
- Identify skill gaps. Do some company visioning to see what you think you will need in job positions and competencies to meet future demands for your company’s products and services? Identify skill gaps and target training and development to address organizational deficiencies.
- Be coachable. Seek growth coaching assistance from knowledgeable experts who can help you avoid potential pitfalls from potential over-optimism in your orders and sales forecasts. The coaches at the NIIC offer side-by-side coaching to help focus your efforts and results.
- Recruit and select talent. Always be in continuous talent recruitment and selection mode. The best organizations are constantly looking to expand and upgrade their employee talent pipeline. “Right fit” talent is hard to come by so always have your “antenna up” for potential new hires.
- Gain mentoring insights. Select seasoned and smart individuals who can offer insider advice on the day-to-day company culture and business building efforts. Note: mentors should be well-respected individuals who have expertise and insights in the business development opportunities and challenges you are facing in growing your business. Their role is to give you unfiltered feedback and express their honest and candid opinions.
As we observed earlier, poorly managed growth is not a good thing. There are many classic examples of “growing broke:” – this includes companies that were on an accelerated path to profitability who derailed because they didn’t have an early warning radar system to self-correct before they imploded. By being attentive to the tips above, your company may be able to navigate the choppy waters of growth and be profitable at the same time! Remember, your resources often lag your opportunities, and your businesses success might just depend on it.