Small business owners are increasingly confident about business growth thanks to a stabilising economy. Many small businesses have experienced revenue growth in the last 12 months as a result of the market entering a period of recovery. Hopefully this is a positive sign of things to come in 2015.
RSM Bird Cameron’s latest thinkBIG study found 64 per cent of business owners are optimistic and believe their business will grow in the next 12 months. In addition, 46 per cent of owners reported revenue growth in the last 12 months, while 34 per cent reported no change and 20 per cent reported a decline.
The economy’s increasing stability inspires confidence in small business owners, and this is reflected in the upward trend of revenue growth.
However, finding skilled people remains the main barrier to growth (42 per cent cited this reason), followed by a lack of market opportunities (29 per cent). There is a shift in the barriers to growing a business. Whereas before the issue was finding opportunities, now business owners are focused on how to meet the demands of growth, such as finding skilled workers. This is a capacity issue to deliver on growth.
RSM Bird Cameron’s experience over the last 12 months has been that many businesses searching for opportunities to grow are finding them. Small businesses are responding more quickly to changes in the market and making the most of those opportunities.
When evaluating growth opportunities small business owners need to look at both the current capacity and capability of the business. Capacity involves identifying the business lifecycle stage and reviewing customer demographics, products and services mix, access to capital, people and supporting internal processes and systems to see if there is an opportunity to improve capacity to support future growth initiatives.
When assessing capability small business owners need to look at both the people and organisational level including existing skills, expertise, access to capital and adaptability to change to see if there is an opportunity to increase the capability of the business.
In both cases, if there is an opportunity to increase the capacity and capability small businesses will need to evaluate how much they will need to invest and how they will transition the business for growth without negatively impacting profit.
Australian small businesses can continue to capitalise on growth in 2015 but there are some steps they should take now to ensure they are in the best shape possible to maximise the opportunities.
Here are five strategies to maximise growth opportunities in 2015:
1. Review the business. Review current income streams and quantify where the business is growing, declining or remaining stable to ascertain the current state of play. Identify current opportunities to expand or change current revenue streams to improve growth potential.
2. Review the customer base. Understand customers’ problems and issues that need to be solved and how your products and services provide a solution to those issues. Understand the customers’ reasons to buy from you, their motivations and drivers in the decision making process. Segment your market into why they buy, what they buy, when they buy including volumes and profitability of respective product/service lines.
3. Identify the growth strategy. Identify what are the issues to improve both the capacity of the business to grow and the capabilities required to deliver that growth. Develop a defined growth strategy in terms of expanding:
– existing products and services to existing customers and markets (market penetration)
– existing products and services to new customers and markets (market expansion)
– new products and services to existing customers and markets (product and service expansion)
– new products and services to new customers and markets (diversification).
4. Develop and document a sales process. Review the whole of organisation selling function within the business to understand the landscape changing consumer behaviours and buying preferences. A review of current sales management philosophies and the infrastructure that supports business-to-business selling within the business is essential in terms of analysing the real sales needs of the business. Successful businesses don’t get the sales function ‘humming’ by accident. Careful planning is required.
5. Optimise processes. Review the business and its processes to remove waste (non-value adding activities) and improve its operational inefficiency to become more competitive and leaner. In RSM Bird Cameron’s experience, most businesses assume that a certain level of waste will always exist and often have no idea how much the waste costs.