Table Of Content

The Essential Guide to Managing Small Business Growth The Essential Guide to Managing Small Business Growth Peter Wilson and Sue Bates Copyright2003 JohnWiley&SonsLtd,TheAtrium,SouthernGate,Chichester, WestSussexPO198SQ,England Telephone(+44)1243779777 Email(forordersandcustomerserviceenquiries):[email protected] VisitourHomePageonwww.wileyeurope.comorwww.wiley.com AllRightsReserved.Nopartofthispublicationmaybereproduced,storedinaretrievalsystemor transmittedinanyformorbyanymeans,electronic,mechanical,photocopying,recording,scanning orotherwise,exceptunderthetermsoftheCopyright,DesignsandPatentsAct1988orunderthe termsofalicenceissuedbytheCopyrightLicensingAgencyLtd,90TottenhamCourtRoad,London W1P4LP,UK,withoutthepermissioninwritingofthePublisher.RequeststothePublishershouldbe addressedtothePermissionsDepartment,JohnWiley&SonsLtd,TheAtrium,SouthernGate, Chichester,WestSussexPO198SQ,England,[email protected],orfaxedto (+44)1243770620. 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Contents Foreword ix Preface xi 1 ManagingBusinessGrowth 1 Makingthetransition 1 Therelevanceofmanagementtheorytogrowingbusinesses 4 Managingeffectivelyandefficiently 7 Settingrealisticgoals 9 Synopsisofthebook 10 2 MakingSenseofStrategy 13 Strategicissues:Settingthescene 13 TheTitanic:Asalutarylessoninstrategy 14 Reviewofcurrentperformance 15 Analysingcompetitiveforces 17 Marketsegmentation:Definingcustomerbehaviour 18 Strategicmarketinganalysis 19 Distinctivecompetence 21 Hygienefactors 21 Definingcorecompetences 23 Completingthestrategicreview:SWOTanalysis 26 Settingstrategy 28 Phase1:Settingouttheoptions 29 Phase2:Evaluatingtheoptions 32 Thechosenstrategy 35 Stretchingyourorganization 36 Organicgrowthvsmergeroracquisition 37 Notes 38 Furtherreading 39 3 MarketingforProfit 41 Customerbehaviour 41 Marketsegmentation 45 Profilingthecustomer 47 Competitoranalysisanddistinctivecompetence 47 Marketpositioning 48 Themarketingmix 51 Productsandproductdifferentiation 52 vi CONTENTS Pricing 53 Place:Channelsofdistribution 54 Promotion:Communicatingtheoffer 55 People:Organizingthemarketingfunction 57 Relationshipmarketing 60 Customerrelationshipmanagement(CRM) 62 Customerfeedback 63 Marketresearch 66 Themarketingplan 67 Postscript:ActiononABCO’smarketingproblems 72 Notes 73 Furtherreading 73 4 DevelopinganOrganizationthatDeliverstheStrategy 75 Understandingorganization 75 Organizationmaintenanceanddevelopment 76 Theoriginsofanorganization 77 Howorganizationswork:Structure,people,processesandsystems 79 Structure 79 Theformoftheorganization 83 People 83 Processesandsystems 88 Specifyingjobsandthepeopletofillthem 90 Otherinfluencesonorganization 91 Organizationaldiagnosis:Howtooverhaulyourorganization 92 Furtherreading 96 5 GettingPerformancefromPeople 97 Attentiontotaskandtopeopleprocesses 97 Peopleandproductivity 98 Personalresourcesandself-management 99 Managingprioritiesandgettingthingsdone 99 Understandingmotivation 101 Positivemotivation,dissatisfactionanddemotivation 104 Gettingperformancefrompeople 106 Managingperformance:Aframeworkforpractice 108 Briefingand‘contractsetting’ 108 Monitoring 112 Feedbackandreview 112 Dealingwithentrenchedperformanceproblems 116 Feedback,learningandgrowth 116 Notes 117 Furtherreading 117 6 LeadingtheTeam 119 Powerinthegrowingorganization:Makingitsafetodelegate 119 Leadershipanddelegation 120 CONTENTS vii Leadershipstyle 121 Workingwithteams 125 Balancingattentiontotaskwithattentiontopeopleandprocesses 128 Teamroles:Compositionofthesuccessfulteam 129 Stagesofteamdevelopment 132 Matchingteamprocessestotaskandsituation 132 Findingthepeoplefortheteam 136 Aligningpeoplewithpurpose:Usingperformanceappraisaleffectively 136 Aworkableappraisalsystem 138 Conductinganappraisalmeeting 141 Systematicdevelopmentofcompetences 144 Recruitingnewpeople 145 Selectioninterviewing 146 Avoidingrecruitmentpitfalls 149 Inductionofnewrecruits 149 Buildingandleadingtheteam:Theunderlyingskills 150 Notes 151 Furtherreading 151 7 Culture,CreativityandChange 153 Cultureandthegrowingorganization 153 Whatisorganizationalculture? 154 Understandingtheorganization’sculture 155 Isthereasmall-businessculture? 156 Theinfluenceoffoundersandowners 157 Structure,empowermentandthecan-doculture 162 Influencingculturepositively 162 Maintainingfreshness:Encouragingbetterwaysofdoingthings 165 Renewalthroughlearning,contributionandgrowth 166 Furtherreading 168 8 ManagingBusinessPerformancethroughFinancialAnalysis 169 Thefinancialstatements 170 Accountingprinciples 172 Exploringtheprofitandlossaccount 173 Exploringthebalancesheet 178 Presentationofaccountsforsoletradersandpartnerships 180 Maintainingadequatecapital 181 Cash-flowstatement 181 Whyisprofitnotthesameascash? 183 Financialanalysis 186 Usingratioanalysistounderstandfinancialperformance 186 Furtherreading 194 9 ManagementInformationSystemsandFinancialControls 195 Controllingprofitandcash 197 Controllingprofit:TheP&Laccount 201 viii CONTENTS Managingstrategythroughgrossprofitmargin 201 Controllingcash:Thebalancesheet 201 Notes 214 Furtherreading 214 10 PlanningfortheFuture 217 Typesofbusinessplans 217 Thestrategicbusinessplan 218 Stagesofstrategicplanning 218 Preparation 219 Businessreview 223 Customerfeedbackandmarketresearch 225 Settingobjectives 225 Settingcorporatestrategy 229 Financialadequacy 230 Reviewingandrevisingthestrategicplan 242 Operationalactionplans 244 Monitoringthestrategicplan 249 Note 251 Furtherreading 251 11 HazardsonthePathtoGrowth 253 Stayfocusedorventureintonewmarkets? 253 Failuretoletgo 255 Afutureroleforthefounder 257 AppointingasuccessortothefounderCEO 259 Familymembersonthepayroll 261 Failuretodelegateeffectively:Underminingmanagement 261 Owner-managerguiltasabarriertogrowth 262 Note 263 Appendix1:ExampleofaStrategicBusinessPlan 265 Appendix2:ExampleofaMarketingPlan 275 Appendix3:ExampleofaJobSpecification 287 Appendix4:CostingandPricingExample 291 Index 297 Foreword It is estimated that there are currently 3.7million active businesses in the UK. Of these firms, a massive 99.8 percent are classified as either small (fewer than 50 employees) or medium-sized (50–249 employees); in fact, approximately 2.6million of these businesses comprise only a self-employed owner-manager. Together, these companies employ more than half (55 percent) of UK plc’s non- government workforce and account for 45 percent of its turnover–contributing significantlytotheUK’sGDPandtoemployment. Itisclearthat,despitethelion’sshareofmediapublicityandcreditgoingtobig businesswheretheUKeconomyisconcerned,smallandmedium-sizedcompanies areatleastasimportantastheirFTSEpeers. However, one-third of businesses fail within three years of start-up. That is a stark statistic, but not one by which aspiring and current entrepreneurs should feel enslaved. Business is a tough game, piled high with challenges, obstacles, problems and, of course, rewards. Owner-managers and founding directors face majordilemmasthroughoutboththestart-upandgrowthphasesoftheirbusinesses, such as how to write an effective business plan that allows initial finance to be raised; constructing a business and marketing strategy to drive business growth; how to find, hire and retain the best talent on the market; and how to manage a business’sfinanceseffectivelyandaiditssurvivalandgrowthbeyondtheinitialtwo yearsoftrading. Many entrepreneurs may not have the entire requisite reservoir of skills and experience to meet these challenges; as a rule, few people do. The key to avoid becoming another statistic or being another failed business is to augment your skills–tobesmarter.Takingappropriate,relevantandpracticaladviceistherefore akeystoneinachievingcommercialsuccess. That is why I am delighted that this book has been written specifically for growth-stage business owners and their key managers who are striving to build a successfulbusiness.Thebookaimstohelpentrepreneursachievebusinesssuccess through providing fundamental skills and knowledge–enhancing the ability of business people to overcome obstacles and make the most of the opportunities that present themselves. It contains the lessons that Peter Wilson and Sue Bates of The Enterprise Partnership have learned from working with businesses at this stage of development over the years. It is a great manual for the time-pressed owner-managerandIamsureyouwillfinditvaluable. Once you have read the book, you may wish to receive a more personalized and in-depth level of advice that cannot be imparted by the written word alone. For those who wish to take this step, there are numerous options on the market.