Every business wants more profits. I’m blessed to be working with many family businesses who are hitting it out of the park even in non-growth areas of the country. And it’s not all by acquisition which many assume is the fastest route. So why are some businesses growing right now and others aren’t?
It’s because the growing family businesses have conquered the six most common roadblocks to growth:
Roadblock #1 – Clinging to past success sectors. People make a lot of bad assumptions. For example, once a heating oil marketer, always a heating oil marketer. Or, once a dealer supply specialist, always dealer supply. And the unfortunate part is that staying in an area of strength sounds logical and like a good management strategy. Sometimes it is. But the break out businesses I’m working with have had the guts to try something new. Like the petro family business I’ve helped go from 40 million gallons to over 300 million. How did they do it? By getting out of “we just do…” thinking.
Roadblock #2 – Inadequate sales force. Invariably, when I talk to a small business having trouble surviving in today’s marketplace and I ask about their sales team, the answer is either that there is none or a small few that are basically servicing the same accounts rather than really selling. No wonder they aren’t growing!
Then those stagnant businesses give me every justification for why – I can’t afford another one, there isn’t enough return on investment, too hard to train what we do, blah, blah, blah. Really? Contrast that with the companies growing organically who have doubled or tripled their sales teams, invested in training, sorted people into inside and outside sales, new sales versus service. These are the companies growing profitably!
Roadblock #3 – Outdated operations processes. A business can unknowingly lose customers just as fast as gain them when they don’t consistently provide spot on service. Lately I’ve seen petro family businesses working oil field companies figure this out very quickly. If they miss one delivery window they can lose a contract.
The best growth companies know that operations must not just keep pace with growth, but, must lead the charge. Catch up is not a game plan. This means tracking and measuring service levels, which at first sounds daunting, is easy once you get started. The hard part is moving your operations team to this new normal level of excellence when the way they’ve operated the past 20-30 years is far more comfortable.
Roadblock #4 – Outdated technology. This usually accompanies Roadblock #3, because the same group that doesn’t want to change processes sure doesn’t want to change technology! For instance, do you have an “old salt” salesman who won’t use a computer? How about an accounting clerk that doesn’t trust your system for automated Electronic Funds Transfer?
Usually the reluctance is driven by the really dangerous human traits of ego, pride, and fear. Fear of looking stupid, being wrong, or messing something up. Fear of long hours during the change. Fear of losing customers.
The best way I know to alleviate fear is to expose your team (and maybe yourself!) to people who have gone through similar technology changes and not only survived, but thrived. It’s why Meridian’s events are so powerful. There is nothing more reassuring than someone who faced and conquered a similar fear!
Roadblock #5 – Cash Flow Constraints. I was talking to a potential client who said he would be growing but it took capital. I then asked his terms to his customers and his suppliers. Each was 10 days. So it didn’t appear to me there was a cash timing problem with growth. He then stated that to “win” new accounts he had to make significant investments. Anywhere from $25K to $50K just to land a new account. So, I challenged that. Was there any new volume he could get without spending money?
Interestingly enough, he started to name off several alternative types of accounts he could secure without paying a dime up front. Sometimes all it takes is posing the right question. And if the growth you want does require capital, banks right now are in the mood to lend.
Roadblock #6 – No Why or Purpose. When you see businesses in strong growth mode, you can bet they have a big “why” they are in touch with as they grow. For some, it’s staging the next generation for success.
For others, it’s for the love of employees and their families, or charitable giving, or maximizing cash out at exit. In my experience, the stronger the why, the stronger the growth.
If, on the other hand, a business has lost desire, has no heirs interested, and is just staying in the business due to lifestyle and friendships, it’s really difficult to maintain status quo without back peddling. Too frequently owners come to Meridian’s sales advisory division after they’ve already started backsliding. That timing is bad for value, but we try our hardest to make the best of it.
To sum up, you can make growth happen. Don’t be married to what you’ve always done, look for new opportunities springing up in your area, expand and upgrade your sales team, get your operations and technology up to date, get your bank line increased and ready, and re-engage with your purpose!
There is something thrilling to me when a client says “we met our three month goal in two months” or “I’ve got to pinch myself because we’re up 40% over last year,” or “we’re seeing an 8% gain in inside sales.” Ahhhhh. The sweet sound of success is music to this advisor’s ears!
Meridian Associates has been partnering with family-owned businesses for over 30 years to remove barriers, accelerate business growth, build their legacy, and reduce stress levels. With three, high-impact business events each year, The CEO Exchange, Women in Family Business, and The Family Business Intensive, we continually provide best practices & proven strategies that keep multigenerational businesses thriving. Discover how Meridian can help your business thrive through our combination of high impact business coaching, advisory, M&A, and precision company valuations by visiting www.askmeridian.com or calling us at 817-594-0546.
