Many challenges come with growing a business. In his new book, “Growing an Entrepreneurial Business: Concepts & Cases,” University of Virginia professor Ed Hess has laid out the top challenges and solutions from his own research of 54 high-growth companies.
“The good news is that most businesses experience the same or very similar challenges when it comes to growth. There is no need for any entrepreneur to reinvent the ‘growth wheel.’ You just have to be willing to learn from those who grew before you,” he says. In continuation of the last post, here are four more growing challenges for entrepreneurs and advisors alike.
- Managing cash flow. “This might sound simple, but it can be a major issue if not handled properly,” notes Hess. “The amount of cash available for investment can limit growth, especially in today’s economy when many small businesses can’t get loans or credit lines. And I can’t help but stress the importance of cautiously managing your checkbooks, credit cards, and online accounts. If you do decide to delegate this task, choose the employee you trust the most and set prescribed monetary limits. Check your payments and accounts every day, because frauds do occur.”
- Spending too much time putting out fires. “The problem is that growth requires the entrepreneur to plan for more growth, to put in place new and better processes, and to be constantly upgrading processes and resetting priorities,” says Hess. “It is very difficult to find the time to do all that when your time is eaten up mediating employee conflicts, correcting inventory orders, calming angry customers, and so on. Entrepreneurs in my study found that they had to be disciplined in getting away from their businesses for short periods of time to think and plan.”
- Creating a high-performance “family.” “Here entrepreneurs face an uphill battle in balancing loyalty and changing performance needs,” notes Hess. “Let someone go who everyone else at the company loves and you’ve created morale and emotional issues. Let a poor performer stay and you’ve created morale and emotional issues. See the challenge? The entrepreneurs I researched learned that you can have a ‘family’-like culture and high performance by having clear job expectations; a fair, transparent, and frequent feedback process; and by giving people a fair chance to improve or to step into a role that they could do well.”
- Understanding that upgrading never ends. “As you grow, the solutions that worked at one level will most likely not work at the next. Inflection points for the companies I’ve studied occurred frequently when they expanded to 10, 25, 50, and 100 employees. When these changes take place, entrepreneurs often realize their hope of having a smooth-running machine is an elusive dream. Successful entrepreneurs and their employees are open to learning and adapting in an incremental, iterative, and experimental fashion..”
“Growing a business is an evolutionary process,” says Hess. “Growth is messy. Growth is change. Growth has spurts, detours, downturns, and spikes. Growth requires constant learning and improvement. And if not well planned and managed, it can outstrip the capabilities of companies.
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Edward D. Hess is a professor of business administration and Batten Executive-in-Residence at the Darden School of Business, University of Virginia. He is the author of nine books, more than 60 cases and more than 60 articles. His work has appeared in more than 200 media outlets around the world. His book “Smart Growth: Building an Enduring Business by Managing the Risks of Growth” was named a 2010 Top 25 Business Book for Business Owners by Inc. magazine.