You've worked hard and created a thriving business, and now you're ready to grow it. But before you jump into expansion mode, you need to take the time to understand the four big hurdles all growing businesses face—and how to create a game plan to tackle them.
According to Statistics Canada, in July 2012, 47.8% of businesses in Canada had less than 100 employees and employ almost half of the private sector labour force. On average, just less than half (49%) of businesses with fewer than 250 employees survive their first five years of operation (Statistics Canada, July 2012). But the fact that many do survive their first five years suggests that these businesses are able to establish and retain a competitive advantage in their markets.
Surviving is one thing. But before you can actually grow your business, you must ensure there is alignment between the strategy, culture and structure underlying your business. Before I made the final arrangements to kick off Vin Room's growth strategy by opening a second location in Calgary, I discussed the top four things to have in your growth plan with some of Canada's most successful business leaders.
1. Strategy and Execution
If you're trying to grow, flawless execution of your strategy is critical to your success. In a micro business, the success may have been dependent on the founder's efforts. In a growth business, the concept has to be bigger than the individual; you will have to rely on others to make your business successful.
Sean Durfy, corporate strategy speaker and former CEO and president of Westjet, offers this advice to business owners interested in growing their business: "Building a good strategy is the blueprint to success. Take the time to understand it and share it with your people."
Flawless execution of your strategy starts with creating a culture of engagement and accountability. If your people don't understand the purpose of the game, how can they play? So, communicate your strategy in a way that is simple to understand. Come up with a message that reflects your vision and repeat it over and over. As the leader, it is important for you to generate discussion about the strategy so that everything is understood by your team before you attempt to execute it.
Moving forward on your roadmap for execution requires choosing metrics to measure performance. Stan Fuller, president of Earls Restaurants Ltd./The Fuller Group, advises that, "by measuring performance, you are telling your people the standards and experiences you value most. Carefully select the performances you wish to measure and beware of measuring so many things that the metrics themselves become irrelevant."
Coming from a large corporation where our performance metrics spanned several pages and we had a team of people preparing performance reports each month, I can appreciate how simplicity and relevance works for my own growing business. It's about fitting the metrics to the purpose; you just don't have the time or manpower to create anything too complicated. We have five metrics, all focused on team performance and engaging the entire team in the delivery of those five metrics. There is individual accountability, as specific individuals are responsible for steering delivery of actions within the metrics, and each individual is accountable through his or her behaviors (inputs) for delivering the results (outputs). I value both behaviours and results, so rewards are based on achievement of both inputs and outputs.
2. Hiring Smart
Many small businesses such as mine don't have the benefit of a Human Resources department, so we often leave hiring to operations managers. The challenge is to come up with a human resources strategy that is sustainable and focuses on attracting and retaining human resources to meet present needs as well as to accommodate future growth plans.
Perhaps the most important piece of advice I've received in this area is from Derek Doke, CEO of Franworks, owner of the Original Joe's restaurant chain, which was named one of Canada's Fastest-Growing Companies by PROFIT in 2010. As Doke plans for 15 new stores each year, his strategy is to "hire ahead of the curve and to be as proactive as possible in order for the team to be well-trained and in place."
Doke says this strategy requires a fine balance between hiring for today and hiring for tomorrow, especially in growth companies where cash flow may be tight. However, you can still be creative in your total compensation strategy. Some of the strategies we utilize at Vin Room are often found in big corporations; things like profit sharing, variable pay based on targets, staggered salary options in contracts, and share options to create a sense of ownership while not breaking the bank short term. Doke utilizes profit sharing by location and territory, and offers various salary options.
Speaking to Durfy and Doke, I am encouraged to hear that our strategy of hiring great people with great attitudes, who are passionate about their job and industry, is the right approach. As Durfy reminded me, "You can't teach personality, so surround yourself with people who have drive."
3. Creative capitalization
I can't remember if I've ever heard an entrepreneur say they have access to all the capital they need. In accessing capital for growth, there are many options, including the Canada Small Business Financing Program, which has assisted over 120,000 businesses in Canada since 1999. Of course, there is the "family and friends" option, but that well may be tapped out by the time you're into your growth stage.
One of the most important things I've learned is that all money is not equal. It can be tempting to take any capital that comes your way, but be careful of the cost. Shareholders with personal agendas that don't align with your corporate strategy can lead to wasted time on investor relations or divert management's attention from day-to-day business operations. That's why we interview our shareholders to ensure there is an alignment of values and direction before they are accepted. It means a little extra up-front work by the founders, but it's well worth it in the long term.
In his early stage growth of Original Joe's, Doke employed some interesting techniques to finance his growth such as high yielding debentures and franchising, in addition to the Small Business Financing program. While franchising allowed access to capital in the early years, he found mixed success in the people intensive, casual dining market. His preference would have been to capitalize the growth organically and Original Joes does not franchise any more.
4. Planning for the future
As my business grew, I quickly became aware that I needed to adjust my management style. One thing I've learned from my corporate days is that, from a strategic perspective, you need to understand your strengths and surround yourself with people to help you fill in the gaps. An advisory board is perfectly suited for this role.
I floated this idea with Durfy, an experienced business advisor, who gave me his perspective that most boards are dysfunctional because they are put together based on personality fit and are not performance managed. He suggested the ideal advisory board is made up of independent people you can lean on for expertise, not governance.
Hmm, what a great idea. I wonder if I can pay them with wine? I'm an entrepreneur after all.
Phoebe Fung is proprietor of Vin Room, a Calgary-based wine bar that ranked No. 25 on the 2011 PROFIT HOT 50 list of Canada's Top New Growth Companies, and has garnered awards from Wine Spectator, Avenue and WHERE Calgary magazines.
More columns by Phoebe Fung