When you’re running an owner managed business, it’s taken as read that one of your key aims will be to grow the company. But growth can mean different things depending on the specific goals and vision you have for your business as a whole.
Do you want to generate large profits in order to fund a lavish lifestyle? Do you have a world-beating business idea that needs to go mass market and therefore you need to maximise your market share? Or, maybe, you’re just interested in cashing out of the company and are looking to increase and strengthen the market value of the business prior to a sale.
Sam Berry, Partner at Haines Watts London, explains the difference between these three areas of business growth, and how setting your goals from the outset is the key to measurable growth.
The need for growth
Growth is such a common goal for an owner manager – but the specific kind of growth you should be focusing on will depend on where you currently are in your business and life’s journey.
Someone once told me that size is not everything!! It’s how that fits in with your personal goals and objectives. There’s turnover, there’s profitability and there’s market value. These are the three main areas of business growth to consider – These are very different goals and will require significantly different experience and expertise to ensure the goals are met.
When an owner manager or entrepreneur comes to me and says ‘I want to grow my business’, my first question will always be ‘What, why and how do you want to grow?’. By sitting down and talking through your vision, we can help you decide which of the three main growth goals is right for you, the business and your long-term success.
1. Growth through profitability and lifestyle
If you’re looking for profits – so you have a nice ‘cash cow’ to provide for your lifestyle – then you’re probably more inclined to grow organically and at a slower pace. If that’s your aim, you should be conscious about taking on good clients, profitable projects and making sure that everything fits in with your ethos of what you’re doing as a business going forward.
There are a couple of important things to look at for any lifestyle business:
- Remove yourself from the business – first off is removing the reliance on you, as the founder, when it comes to the day-to-day running of the business. You’ll be the key driver of the business, but once the company gets to a certain size, there’s a pressing need to step back and spend less time on those everyday tasks.
- Work more strategically – secondly, you need to start working ON the business, rather than IN the business. Your company needs to be able to operate without you – so you have the free time to look at strategy, business development and growth plans.
2. Growth through revenue and/or market share
If you’re looking to grow your market share, scale up the enterprise and aim for hypergrowth, then it’s vital that you’ve made that step to remove yourself from the everyday business.
You’re not going to take over the world, or disrupt a sector, if you’re the only person driving the business. It’s so important to get away from working in the business, so you can move to working on it and driving areas like business development, sales strategy and the bigger picture elements that are going to push you to increase market share.
If you’re just looking to increase market share:
- Think big! – position yourself as the strategic leader of the company and leave your team to deal with the day-to-day work. Your role is to come up with the bigger picture and drive the overall growth agenda.
- Focus on revenue – concentrate on boosting revenue and investing money back into the business to ensure you capture market share as quickly and efficiently as possible. This will promote growth, but could also hamper profits in the short term.
- Disrupt the Market – be a market disrupter and make your presence heard. When growing your market share, you need to be visible to as many people as you can. Ensure marketing and promotions are targeted well and react quickly to current trends.
3. Growth through increasing market value
If you’re looking to sell up in the next three years and want to increase your market value, you could have a blend of organic growth, targeted acquisitions and investing profit back into the business to raise that underlying value. It’s important that clients and customers are seen as long-term customers and therefore one focus could be on longer contract terms.
Following through on the vision of a business, and having long-term leadership to drive growth, is what pushes the company to bigger successes. But sometimes, as a founder, you’ll want to move away from the beast you’ve created to set up something new.
To get the best price when selling:
- Understand the market valuation – before setting out on the goal to increase market valuation, it’s extremely important to understand how different types of acquisitions will value your business. Whether this be an IPO, trade sale or MBO – these may differ slightly and therefore may change your strategy.
- Stay focused on your growth goal – even if your goal is to exit, it’s important to apply yourself to growing the business, meeting your profit targets and adding the best possible value to the company.
- Concentrate on market valuation – win work in the right areas, increase your market share and make yourself attractive to a potential buyer or investor. By boosting your underlying market value, you get things ready to sell – and ensure you can withdraw the maximum equity at the point of exit.
How an advisor helps you grow
If growth is the goal, then working win an experienced advisor helps you to set, measure and meet those goals – whichever of the three key growth areas you’re aiming for.
A lot of people will tell you that they want to grow their business, but when you ask them if they want profits, market share or market value they won’t know the answer. It’s only by going deeper with the questioning that we can begin to help you understand what you mean by growth – and create a strategy around that to get you there.
To keep you on track we will:
- Sit down with you and your team to find out what your objective is
- Devise a growth strategy with that core objective in mind
- Then we’ll provide reporting, on an ongoing basis, so we can hold you accountable to the key actions in that plan.
Once we’ve sat down with you and identified exactly what you need from your growth, we can build the strategy and look at timeframes and angles of how you get there. When we’re checking in with you on a monthly basis to review your performance, it’s amazing how that can drive your growth goals forward.
Keeping you on track
Our job is holding clients accountable to how the business is performing, and working with you to really start taking action to meet your goals.
We help you to define your key growth goals, measure performance and be there at each step to make sure the core actions are taken and you achieve success.
Talk to one of our London Business Advisors about your growth goals
Haines Watts is a firm of London chartered accountants and business advisors based in Holborn.
Want to know more? Call us on 0207 025 4650 or email firstname.lastname@example.org