Staying Ahead of the Hammer: How to Build and Manage Your Business to Achieve Long-Term High Growth

Staying Ahead of the Hammer

How to build and manage your business to achieve long-term high growth

Staying Ahead of the Hammer:

How to build and manage your business to achieve long term high growth

Copyright © 2015 Exigent Ventures Ltd

All rights reserved.

No part of this book may be produced in any form or by any electrical or mechanical means including information storage and retrieval systems – accept in the case of brief quotations in articles or reviews – without the express permission in writing from the author or its publisher.

All brand names and product names used in this book are trademarks, or registered trademarks of the respective holders.

ISBN 978-1-5049-4439-7 (Paperback)

ISBN 978-1-5049-4440-7 (Hard Back)

Dedication:

To my family and especially my

Wife who’s love and support has been

vital in producing this book.

Acknowledgements

To all those whose have helped me put this book together. In particular, Tim Levey, Barnaby Wynter, Shirley Mansfield, Andy Snook and Sue Funkhouser for their time in reading the early manuscript and for their valuable comments and support. A special thank you to François Reynier for his work on the graphic design.

It would be a lesser book without them.

Contents

Introduction

What Is a High Growth Business?

Who Should Read This Book

What You Will Get from This Book

The High Growth Problem (The Importance of Controlling the Hammer)

The Fundamental Challenge

How we Describe this Problem

How Does this Apply to a High Growth Business?

Vision (Getting to Your Why)

What is a Vision?

Goals

Mission Statements

Constructing Your Vision

Summary

Culture (Creating Competitive Advantage)

The Cultural Wall

The Cultural Battleground

Senior Appointments

Your Business is Unsaleable

Culture and Business Performance

Defining Your New Culture

Summary

Strategy & Planning (How to Get Ahead of The Hammer and Stay There)

What Are the Strategy Questions

Building A Strategy

Implementation

Monitoring

KPI’s and the One Page Plan

Summary

Talent Management

The Talent Management Problem

Training

The Right Fit?

Developing What You Have

Your Stars

Your Fixers

Your Talent Management Plan

Recruitment Planning

The Recruitment Process

Integrating New Recruits into the Business

Building an Effective Management Team

Developing a Common Management Language

Getting Your Team’s Heads Up

Accountability

Maintaining Quality in Decision Making

Summary

Financial Management & Control

The Cash Flow Gap

Financial Management

You as a Manufacturer

You as a Service Provider

Forecasting

Summary

Organisational Efficiency

Consistency

Clarity

Absorption

You are no Longer Indispensable

Doing the Right Work

Less Micro-Management

The Ability to Benchmark

Processes and KPI’s

The Process Efficiency Lifecycle

Summary

Business Development

How to Build a Reliable Sales Forecast

Forecasting for a New Business

What Lessons can we Learn

What do These 3 Categories Mean and What is Their Significance?

Known Sales

Seen Sales

Unseen Sales

What might form your unseen forecast?

How to build a set of structured sales targets.

Creating a Structured Sales Process

The 6 Attributes of a Structured Sales Process

How to Create a Structured Sales Process

Acquisitions

Getting Emotionally Involved with the Sale

Not Having a Walk Away Number

Not Understanding the Impact of Culture

Underestimating Post Acquisition Management Effort

Buying a Business of the Right Size

Summary

Final Words

Introduction

I was first exposed to sustained high growth when working for a business, Admiral Computing Ltd, in the early 90’s. Like now, we were coming out of the recession of the late 80’s and the economy was still very sluggish. Nevertheless, the culture of the business enabled it to take advantage of the opportunities the market presented. It seemed all too easy to be able to sustain a growth rate of over 20% pa. The business continued to achieve that, or growth rates near it, for the next 10 years. In that time it had grown from a company of about 150 staff to over 2500 operating in the UK, Europe, Asia and Australia. It was during this time I acquired the knowledge and really understood the issues that impact sustained high growth.

At the time of its acquisition, the company’s share value was over £1bn, which had put it into the FTSE 100. In its final year it started to fall away from those growth rates, when it failed to maintain its commitment to its values and culture, and in addition, the departure of one its founders took the board’s eye off the detail of the business, which hitherto was something that set it apart from its competitors.

Many of the ideas and approaches in this book come directly from the experience I gained from 10 years of working and managing in a high growth environment and at times extreme growth when, for example, we grew our Singapore business from 28 to 81 staff in less than a year. This, together with the additional experience I have gained with small and medium businesses in the UK, has given me a unique insight into how to manage a High Growth Business.

I have seen from personal experience that many business owners are rather surprised to find themselves heading up a High Growth Business which in a lot of cases has got there almost by accident. Whilst I know that all the best practice guides say you need to have your vision and objectives sorted out and without that you can’t succeed, the truth is, that most owners of High Growth Businesses don’t have that stuff in place. What they have is simply a good idea or a great service, which has tapped into the needs of the customers in their industry in a way that their competition has failed to do. Consequently, customers have clamored to get their hands on their product or service and in attempting to service this demand, they have unwittingly created a High Growth Business.

I recall a case of a construction business which was growing at over 50% per annum. The owner had none of the vision element, at least he could not explain clearly what his vision was, he had simply hit on a novel way of providing his service and it had made a connection with his market that left his competitors standing. More interestingly he wasn’t particularly good at selling, but his service delivery was outstanding. What enabled him to keep going was his ambition; this is an essential element to creating a High Growth Business.

What is a High Growth Business?

Defining High Growth is a more difficult question to answer than you might think, primarily because there is no single definition of a High Growth Business. There are a few pointers though, in the USA the term Gazelle Company has emerged to describe a particular kind of High Growth Business. It was first coined by David Birch when describing rapidly growing small businesses.

David Birch's identification of Gazelle companies came from his 1979 report, The Job Generation Process, in which he identified small companies as the biggest creators of new jobs in the economy. Birch estimated that whilst Gazelle companies accounted for about only 4% of all U.S. companies, they accounted for 70% of all new jobs. Birch noted that the growth pace of Gazelle companies far outpaced that of the Fortune 500 Elephants and Main Street Mice.

To be considered a Gazelle company, the business would have to have grown by at least 20% per year for four years and have base revenues of a minimum of $1million.

In the UK there is no similar definition of a High Growth Business. It’s only recently that there has been any focus at all on this sector. It seems clear, that as a group, High Growth Businesses have been very much left to their own devices, probably in the belief that there were other sectors more deserving of attention. This goes for both advisory services and government. However, the financial crisis of 2008, the subsequent recession and the UK’s continued sluggish growth has put much more focus on the need to grow the economy. This prompted the government to look around to see what it could do to stimulate the growth of businesses further, in an effort to kick-start the economy and more specifically to stimulate employment.

This was especially important because of its policy to reduce the burden of the public sector on the country’s finances. Replacing these public sector jobs by further increasing employment in the private sector was critical to their strategy. It was at this time that the government started to recognise the value of so called High Growth Businesses as a way of creating growth in employment and it has singled out this sector for special support.

A study published in November 2014 in the UK by Octopus Investments Limited in their report OCTOPUS HIGH GROWTH SMALL BUSINESS REPORT 2014, supported and enforced Birch’s findings in the USA. Their key data showed High Growth Businesses, being those with a growth rate of 20%pa or more and a Turnover of £1-20million, represented 3.4% of the UK economy in 2013. They contributed an estimated 36.2% to UK economic growth in 2013 and 68% of employment growth between 2012 and 2013.

It has also become clear that High Growth Businesses face significant problems specific to the high growth environment and many businesses fail to maintain high growth as they fall prey to these problems. Importantly the damage done to these businesses, when the high growth wheels have come off, has often resulted in the business marking time for 18 months to 2 years whilst it sorts out the problems. Worse still, is the impact on business owners, which often results in them backing away from future high growth ambitions because the consequences of their problems has just been too painful.

Who Should Read This Book?

I could easily say everyone, but that would rather go against all the rules of marketing, let alone those for writing a book. Of course I want as wide an audience as possible but I had some specific attributes in mind and this is to whom I targeted my work.

Primarily this book is for ambitious people; you may be employed or you may be running a business of your own and are looking for some understanding of how you can accelerate and maintain high growth in your business.

Most likely you are a business owner, who through entrepreneurial flair has built a business that is growing rapidly and is looking to understand how you can control the roller coaster that is high growth and reap the benefits of many years of sustained growth.

It is unlikely that you will have gone through the sort of business education and training available to employees of large corporates and that you want some practical help in understanding how high growth impacts a business.

More importantly you are insatiably curious about business and want to find out what makes the high growth environment so challenging and how you might transfer the knowledge of this environment to better your own circumstances.

What You Will Get from This Book

This book has been written recognising that there are precious few texts available on this subject and fewer still that look at how business mechanics are impacted by high growth.

It has been written to explain two key ideas. Firstly, that being successful in high growth is more about developing the business as a whole, rather than it just being an issue of sales growth. To achieve high growth consistently, you as the business leader, have to learn to manage multiple functions within the organisation and keep them in balance to support continuous sales growth.

Secondly, to get business owners, leadership teams and management alike, to look forward and be proactive in directing their business. It’s about getting your head up from the detail of your business and looking out to see what’s likely to impact your business in the future. This often requires a massive change in peoples thinking, it’s about having and implementing a can do attitude and being confident the information you have about your business is accurate. The conclusions that you can draw from that information will allow you to make the correct decisions about moving your company forward. You’ll be confident that you can address potential problems and meet challenges far more effectively than those of your competitors who will only react to events rather than anticipating them.

The book is built around seven key areas which describe in some way all parts of the business. They are Vision, Culture, Strategy & Planning, Talent Management, Financial and Management Reporting, Business Systems & Processes and Business Development.

This route through a business is based on my model for developing a High Growth Business. Vision is the Keystone which supports the other areas. Culture is critical in supporting your vision and setting the behavioural attitudes for your business. The next stage is to develop your strategy and build an implementation plan. From then I look more at the operational aspects in particular talent management. People are a critical success factor for a High Growth Business and understanding how to develop and nurture talent is a vital skill. We then follow a more traditional route through a business, looking at finance and in particular using financial information to help forecast the future. Business systems and processes look at how to systematise your business and how to develop a results based rather than efforts based business by using KPI’s. Finally, and perhaps surprisingly for some, we look at business development. My logic for this is very much experienced based, in that most High Growth Businesses don’t have too much of a problem with sales, rather they have a problem serving the sales they are winning.

Some chapters relate directly to the leadership and management skills that owners need to drive growth, whilst others look at the detail of the business. What makes this book different and of interest to you is that I have tried wherever possible to view issues from a high growth perspective, as well as explaining how an issue impacts on the business. For each key area, I have also included practical advice, often supported by easy to use tools, to help you to more easily manage those high growth issues.

Each Chapter is self-contained, so you can dip into the book at any point and go to the problem which may be causing you the most trouble immediately. There is nonetheless a theme which recognises that all these areas are interconnected and that in addressing one area you will get positive improvements in others.

The main chapters includes a summary section and a space at the end for you to add notes as you see fit. Also as you go through the book you will be presented with a number of tools to help you address particular problems. You can get free access to these tools by going to www.managinghighgrowth.com/downloads.

Managing a High Growth Business is not easy. There are many things, as a business owner, you need to consider and act upon otherwise you have the potential to be overwhelmed. Most successful owners quickly recognise that their job is no longer to perform what the business does, but rather to manage the business as a whole. This requires not only the development of new skills in leadership and management but also a change in your habits and attitudes. This will become apparent when we discuss the issues around, vision, culture and talent management. However for those owners who are prepared to make those changes, the rewards can be great both financially and in the recognition of the fact that you have achieved something extraordinary.

The High Growth Problem (The Importance of Controlling the Hammer)

Too many businesses experience high growth for the briefest of times because the leadership team fails to understand the implications of sales growth on the rest of the organisation. This failure will inevitably lead to a hard landing for the business.

- Laurence Ainsworth

The Fundamental Challenge

High Growth Businesses that struggle, typically have an imbalance between sales growth and organisational growth. It is this simple imbalance that results in growth breaking down, often catastrophically. It is not just smaller businesses that can fall foul of this rule, larger companies are equally susceptible, for example:

The underlying issue is that our management and operational capacity has fallen behind the needs of a rapidly growing business.