You Think The Recession Is Holding Back Your Growth?
In research, growing businesses say that market conditions would have the greatest impact on inhibiting their growth. It does not surprise me that businesses cite market conditions as the key influencer of growth but this does blur some of the key issues around the subject of growth.
Key factors that Inhibit Business Growth
Research, as well as an intuitive feel, consistently suggests that there are several key factors that inhibit the growth of a business. No one factor dominates but rather a combination is what the entrepreneur normally cites.
The three key issues are:
- Market conditions
- Staff/recruitment issues
- Cashflow, and
Put another way; finance, labour and market issues.
However, the growth question provokes some other arguments about growth that need to be aired.
One. Of course market conditions impact on business growth; in a growing market, your business can grow without gaining market share. Think of the market as a balloon; if your market share is like a circle drawn on its surface then your area (turnover) will grow as long as the market grows – imagine blowing air into the balloon and how the circle will increase with the increase in size of the balloon.
Two. If you ask successful people to look at what held them back in the past then you get another answer entirely.
After the event, successful people do not dispute the importance of finance, market and labour issues. Interestingly, these are seen as external factors. Research such as the LBS Pulse Report concurs with Tenon that the number one external factor holding back a business is, to be specific, market growth.
BUT… the key internal factors cited are lack of innovation and the thorny issue of willingness to accept the price you have to pay for the growth.
The plot thickens
Here is the crunch… the core of the debate about growth and what holds it back… the ‘winners’ claim that the ability to grow is dominated by the internal factors (lack of innovation, fear of diluting ownership, aversion to debt). So, to grow, you must possess conducive internal factors that dominate the hostile external factors.
At the heart of this argument is the price of growth… are you prepared to accept the loss of managerial and/or financial control? If you are not, then do not pass ‘GO’ and do not collect your 200 pounds!
Three. Rather than focusing on poor performance let’s ask ‘What is it that the really successful businesses do?’ The successful are obsessed with:
- Where do we want to be in, say, three years’ time? i.e. strategy – planning while being aware of the outside environment
- What is it that our clients really want, and how can we get people to buy it? i.e. marketing
- How can we work together? i.e. teams and people.
This holy trinity of strategy, marketing and teams (underpinned by financial understanding) is an obsession that I find in all successful fast growth clients. These clients don’t look at market conditions alone, shrug their shoulders and give up trying – they are constantly measuring the outside environment and constantly adjusting their game to suit the conditions.
It is probably changes in the outside world that will ‘get you’ in the end. Often imperceptible changes in the market place change the landscape that you are working in and you might not even notice the changes. It is the ability to recognise and respond to change that separates the exceptional from the average business.
So, when asking the question ‘What inhibits growth?’, we cannot expect a simple answer. I agree that the number one issue is market conditions (when each participant can only have one choice). However, the reality is more complex.