During the last years, the pace of business creation in Spain has registered a strong increase, becoming one of the most dynamic economies of the European Union in this field. However, the rate of business failure in our country has also been – and still is – very high.
According to the experts, in this failure, not only have businesses been immersed that have not been able to gain a foothold in the market, but also others that have exceeded their growth forecasts and have not been able to manage the increase in volume and complexity that they had acquired.
Most entrepreneurs start their career from scratch, creating a small business, in which they play the role of bosses and employees at the same time. But some of these businesses acquire, in a short time, a dimension that not even its own driver had foreseen. Thus, the company becomes a complex framework, in which the different areas of management have little to do with the rudimentary beginnings. How to deal with these changes then?
When someone starts a business, usually he makes all the decisions and performs most of the tasks. Subsequently, in the entrepreneurial stage of initial growth, the entrepreneur is in a stage of management in which he begins to delegate and sets the general direction of the company.
Later, when there is rapid growth, he hastens to form management teams and focuses much more on tasks that have to do with planning and communication. In a fourth phase, when there is a continuous growth, the action must focus more on the strategy, on promoting innovation and on the business culture, as well as on fostering the cohesion of its team.
However, when the company experiences rapid growth and does so in a relatively short time, it is not always easy to differentiate the phases described above and it is common for some strategy errors to occur, as well as for management and planning. For example, in the first area we can find ourselves with an inadequate focus of the target audience, poor management of relationships with suppliers and customers or a lack of foresight.
In the second area, there may be a lack of preparation, financial ignorance or poor HR forecasting. In the third, excessive indebtedness, an incorrect investment, a lack of foresight or a bad cost analysis can occur.
THE 12 MAJOR CHANGES AND THE STRATEGIES TO FACE THEM
1. NEED TO DELEGATE
As companies acquire a greater dimension, the degree of complexity in their management increases. This implies that the entrepreneur, who since the constitution of the company was used to making all the decisions and to perform all tasks, must assume a more strategic role, which means having to delegate a large part of the tasks.
Become a planner Many entrepreneurs are often very reluctant to delegate functions, since they consider that they lose control of the company. This has as a consequence a loss in the effectiveness of the management, since they are still immersed in the daily management, which prevents them from carrying out the planning tasks in the medium and long term.
Trust your collaborators It is inevitable to open decision making to more people. As the organization grows, business units are created, new departments, and that inevitably involves more people in a decision process. Most of them have a hard time delegating because they are sure they will spend more time explaining something to someone than if they do it themselves, but they do not realize that they will never be able to do new things or take on more responsibility.
2. TO OVERCOME TRAINING LAGUNS
Another problem that usually arises is the lack of capacity to manage a larger and more complex company. The solution is because the entrepreneur performs various training programs in those areas where there are more gaps.
- Consolidator profile. It is important to highlight the profile of the person who starts to create the business. In a first stage the entrepreneur profile is the most appropriate, but in a second stage – for us the most difficult – the appropriate profile would be that of a consolidator. There are very valid people to promote, to create and to develop, but who lack both the knowledge and the character and skills necessary for the company to consolidate.
- Training for all. When the company grows and becomes more complex.
- Training skills also affect employees. Create a fighting spirit, not only can be achieved by doing internal meetings, but it is necessary to train people.
3. FROM FRIENDS TO PROFESSIONALS
When someone creates a business, he feels tempted to involve his friends and acquaintances in him. Delegating tasks based on the bonds of friendship with the entrepreneur is a serious mistake, since from a certain size management requires great professionalism.
To be competitive, you have to be professionals. The process of professionalization is not always easy, since the business usually starts, almost always, with low-skilled employees. When you start, you have to be competitive, not only in quality but also in prices.
4. THE ABILITY TO CREATE TEAMS
It is one of the first tasks that the entrepreneur must face when the business has already acquired a certain size. But, when the growth has occurred in an accelerated way, in a short space of time, the formation of these teams becomes more complicated. So, the classic flow charts do not work.
Director and soloist. The entrepreneur is the center of all activities, he is an orchestra conductor but, at the same time, he is the soloist of each instrument, because he considers himself the best and if he does not do it he will not be correct.
First the business and then the organization. When you start, what matters most is getting a job for the company, selling above the cost price and controlling the administrative tasks (not productive) at the lowest cost, until reaching profitability. Once this point has been overcome, you can worry about organizing the administration of the company. But will not it be too late?
5. AN ORDERLY GROWTH AND WITHOUT LOSING THE HEAD
When you grow rapidly, it is not strange that you do it in a disorderly way and without realizing many aspects that are contributing to that growth. But, when it reaches a certain dimension, it realizes the importance of knowing what those aspects have been and how you can promote them to maintain growth.
It is then when the entrepreneur asks: How can I better know the strengths and weaknesses of my company? Is it worthwhile to carry out large market studies or do I continue to rely on intuition, which has given me such good results?
Stop thinking Deepening the knowledge of the company and the market is important in the second phase of the company, when it is growing rapidly, increasing income, expenses and benefits in parallel, without losing balance. That’s when you have the advantage of having more money for administrative-financial tasks, marketing, and so on.
Promotions can be a breeding ground for problems and misgivings, if they are not done well. And, without a doubt, it is one of the issues that the entrepreneur who has prospered quickly has to face, without remedy. As a company grows, new positions of responsibility are also created. In most cases, these positions are covered through internal promotions. This has a direct positive impact on employee motivation, because it serves as an example to others, but it is also a delicate process. You have to promote those who demonstrate aptitude for the position. It would be a mistake to appoint your best seller as commercial director just for the sales you make. You would lose – sure – a good seller and it is possible that you win a bad manager.
7. USING EXTERNAL CONSULTANTS?
Many entrepreneurs have already become accustomed to outsourcing some jobs from the beginning, before their business got bigger. The outsourcing of tasks is essential at the beginning, when there is not enough work to hire a specialist. In any case, the advice of the experts is as follows: “Outsource what is not basic or key to a business activity, that is, what does not generate value. But do not outsource R + D + i (Research, Development and Innovation), sales, administration or service (differentiation factor).
8. CARING FOR HUMAN RELATIONS
Another of the challenges one faces when the organization substantially increases the number of employees is the maintenance of close human treatment.
From you to you. It is important that people do not become numbers, as in many multinationals. Therefore, we must always try to get everyone the best treatment, since we are all people, regardless of the position we occupy, and that should never be forgotten. Human relationships are very important in a company, in general, but even more in a service, and contribute in a very prominent way to create the ideal work environment.
9. AVOID BUREAUCRACY
There are few entrepreneurs who, accustomed at first to do everything directly and with the utmost speed, now complain that the growth of their company is bringing them a certain bureaucracy, which they do not always know how to deal with.
It is better to make a mistake than not to act. Do not postpone decision making; It is better to take a wrong one than not to take any, because there is paralysis in the organization. Consult, but do not let yourself be influenced, because to whom you ask for an opinion of the organization, you may have different interests than yours as an entrepreneur.
Grease the system. We must avoid bureaucracy and slowing down to provide the system with agility. We must avoid that the decisions are delayed or slowed down by the procedure; If that happens, you have to change it.
10. ENSURE FINANCIAL CAPACITY
When the numbers start to increase dramatically, it is sometimes difficult to maintain the balance between income, expenses and investments. That’s when the entrepreneur has to develop his skills in this field. We must ensure sufficient financial capacity, both to finance new investments and to cover short-term needs. Those companies that tend to finance expansion investments with a high degree of financial leverage tend to have serious viability problems in the medium term. Likewise, an imbalance between collection periods usually implies that greater volume of activity generates greater liquidity problems.
11. DO NOT ACT LIKE NEW RICH
Another temptation that the promoter of a business can find when it grows considerably is to act as a ‘new rich’. It is important to be clear about your capacity for growth.
Humility, synonymous with intelligence. Entrepreneurs must be clear that if they do not take care of the company, they do not grow. They have to reinvest a very important part of the benefit and, above all, they should not act as ‘new rich’, since the customers with whom they have started are usually the same and the values can not change.
12. KNOWING TO STOP TIME
There are few entrepreneurs who find that their business has grown enough or even more than they thought and, although they could continue doing so, they believe that it would not compensate them, either because of the personal costs that would be incurred or because of other issues professionals. In these cases, knowing how to stop on time and maintain the company at the desired speed is not always easy.