7 Revenue Growth Mistakes That Can Kill A Company
Revenue growth can be a roller coaster rather than a hockey stick. With fickle consumers, intense competition and cost scaling challenges, managing the revenue growth of your business can feel like managing chaos.
One of the biggest challenges for business owners is having the head space to troubleshoot business growing pains. And you need experience to understand and diagnose the problems that are holding you back.
So, how do you manage the chaos of revenue growth? Our experience working with growing businesses has highlighted some common mistakes. Do you recognize any of the following in your business?
Revenue Growth Mistake #1
Wrong Go to Market Strategy
Initial success for many businesses can be an eclectic mix of hard work, innovation, the right product or service at the right time and sometimes plain luck. However, building a sustainable and growing business needs a clearly articulated go to market strategy.
The first question is ‘are we expanding or are we not?’. Expansion should be a conscious choice rather than an unplanned accident. We all know business owners who have grown an enterprise from a sole agency to 30 employees and decided that is the right size for them. They have chosen not to grow beyond that.
If the answer is ‘yes we are on an expansion path’ then you need a clear revenue growth strategy. There are a range of strategic tools to help map out revenue growth focused strategies. For example, the Ansoff Matrix, also called the Product/Market Expansion Grid, is a tool used by businesses to analyze and plan their strategies for revenue growth.
The four strategies of the Ansoff Matrix are:
- Market Penetration: This focuses on increasing sales of existing products to an existing market.
- Product Development: Focuses on introducing new products to an existing market.
- Market Development: This strategy focuses on entering a new market using existing products.
- Diversification: Focuses on entering a new market with the introduction of new products.
Using a tool like the Ansoff Matrix is a good starting point for selecting a strategic approach to revenue growth. From this you can develop a full Go to Market strategy focusing on areas such as your channel strategy and marketing, product or service pricing, product innovations, timings etc.
If you are experiencing revenue growth but do not have a go to market strategy you are falling into mistake number one.
Revenue Growth Mistake #2
A common mistake in revenue growth focused businesses is not knowing what to measure to track success. It is all too easy for a business to track the wrong Key Performance Indicators (KPIs) or to track too many or too few KPIs.
KPIs should first and foremost link to your overall strategy. And they should be used regularly to measure performance against your strategy and to provide insights on corrective actions. Then the KPIs should help measure the success of those corrective actions. All too often the KPIs used are not the right ones, not reviewed, or not acted upon.
Along with a strong set of KPIs your business needs to have a good set of financial forecasts, including some scenarios to support your revenue growth plans. These also need to be reviewed, analysed, and updated on a regular basis.
There is no magical number of KPIs and no pre-determined list. You need to work with your advisers to select the right list of KPIs for your business, its stage of revenue growth, your strategy. Then you need to not just measure the KPIs but manage your business using them.
Revenue Growth Mistake #3
Ignoring Customer Service
As a business grows there are always growing pains. The most public of these is customer service. We are often so busy chasing the new customer that we risk ignoring our existing customers.
As our customer base grows normally so do our product offerings. This product complexity brings its own customer experience challenges and different products and different customers demand different levels of service support.
Your goal is to be able to meet the needs and wants of all your customers, leading to increased customer satisfaction. You need to understand your customer experience journeys, identify and eliminate customer pain points and regularly ensure you are tracking customer experience. The tools you use will depend very much on your industry, but if you don’t have a regular practice of focusing on customer service delivery you are opening yourself up to some unpleasant surprises.
Revenue Growth Mistake #4
Poor Operational Delivery
As you experience business revenue growth you need processes and systems that scale. That means a lot of operational improvements, hiring staff, training staff, scaling costs. The challenge is:
- Spend too little on resources and you do not have enough to meet customer demand, and your revenue growth falters; but
- Spend too much and you impact profit and more dangerously cashflow – putting the business at risk of failing due to being overstretched.
It can seem like a vicious cycle. And to a certain extent it is. Your rate of revenue growth, your scaling of costs and your cash flow are all intertwined. All too often businesses see revenue growth leading to poor operational delivery which leads to a new set of problems. The solution is to know how to successfully scale your operations and associated costs to match your revenue growth.
This article will give you more guidance about scaling operational costs.
Revenue Growth Mistake #5
Underestimating the Competition
We do not live in a vacuum. Other businesses will respond to your activities in the marketplace. Competitors will get better – they will fix customer service issues, launch a digital offering, or whatever – if they are smart. Long established competitors could have deep pockets and fight lost business revenue with price reductions or more aggressive sales and marketing tactics.
Make sure you understand your competitor’s position in the marketplace and how you are competing with each other. Take time to consider how they might respond to losing business to you or other players. Have prepared response plans and scenarios for competition reactions. Make sure you have the resources (cash and people) to be able to respond to any competitor reaction.
Where your marketing strategy takes you into new markets with new competitors be particularly focused on understanding all the players and strategizing how they might respond to your business entering the market. Unless the market is growing your revenue growth is going to result in someone else’s revenue loss.
Revenue Growth Mistake #6
Not enough capital
Managing cash burn is critical for all revenue growth businesses. Too often the spend and investment is not well managed, meaning money is expended on non-essential items. The business then lacks the funds to manage the next stage of growth, resulting in an urgent need for further capital injections.
Alternatively, you see some businesses where insufficient money is being allocated to revenue growth critical activities like marketing and sales. Under spend on these areas at your peril when you are driving revenue growth.
The two key actions here are:
- Have detailed financial plans and cashflow models.
- Understand the key spending activities which will drive return. Make sure you focus on spending sufficient money on these essential items. Avoid spending money unnecessarily on non-essential items.
Then make sure you are monitoring cashflow on a weekly basis and adjusting your business plans accordingly. Ensure you have enough capital to meet those plans. Prepare well ahead for your next capital raising round.
Revenue Growth Mistake #7
Lacking a Plan
We have talked a lot in this article about strategy. To support your revenue growth aspirations the business needs a written plan. The plan should set out your revenue growth strategy and include monthly, quarterly and annual actions, action owners, expected outcomes, and KPIs. Progress against this plan needs to be reviewed on a regular basis – ideally weekly.
Your plan doesn’t need to be fancy, but it does need to be detailed. It should have clear actions, outcomes, timeframes and action owners.
Remember Rome was not built in a day.
Scaling a business is a disciplined process that needs close attention to the interrelated levers in your company. Pulling one lever too early or too hard or too late could break another part of your business eco-system. Like the expansion of anything from the Roman Empire to Apple Inc. expansion takes time, expertise, and hard work.
It can be lonely for a small enterprise owner tackling this by themselves. The most precious commodity for a business owner is time. As your business grows you become more time poor. With growing businesses, the demands on the business owner become greater as you need to spend more time working on the business and not working in the business. Ensure you bring in the right experts to help you through your revenue growth phase.
For more suggestions about driving revenue growth – or for help with other business challenges – contact Fiona Harnett at MacGregor Jamee to arrange a needs assessment.
MacGregor Jamee helps SME owners increase revenue, reduce costs, and improve operational efficiency.
We do this by providing them with the sort of high calibre chief financial officer, business mentoring, leadership coaching and business consultancy services often only available to large corporates.
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To arrange your free assessment contact Fiona Harnett on
09 5255735 or email@example.com.
Or visit https://macgregorjamee.co.nz/