For larger companies, it is often maturing markets and inflexible organizations that dampen growth. However, closely held and entrepreneurial companies are built for growth. They operate in a world of innovation, rapidly changing technology, and entrepreneurial passion. For these businesses the challenge is not how to grow, it’s how to overcome the inevitable barriers to growth.
Some barriers are out of your control — technology that doesn’t work or government regulation. But if you are better prepared to overcome the barriers under your control, you have more options and opportunities.
Barriers to Growth
Here is my list of the 12 most common barriers to sustainable growth. Each of these barriers requires a different response, so it’s important to diagnose your problem (i.e. get CLARITY) before looking for a solution.
1. Lack of a Sustainable Business Model — The only way to grow a business without relying on a continual infusion of capital is to find a sustainable business model — one that that generates the cash necessary to fund continued growth of your business.
2. Misread Market Dynamics — Does the market not exist? Is the market ready? Or is the market is too small?
3. Weak or unclear Value Proposition/Brand Promise — Why should someone buy your product? What problem do you solve with what benefits in cost reduction, revenue enhancement or operational improvement? The answer will affect product strategy, pricing, sales strategy and messaging.
4. Weak or unclear Positioning — The same company with the same product can position itself to create high shareholder value, or to hit a wall. Getting positioning right is really hard work — growing your company without the right positioning is even harder.
5. Lack of an effective Growth Strategy — What market segments is your company targeting? How does your company find and qualify prospects, using both traditional and digital media? What mix of sales channels makes the most sense?
6. Dysfunctional Team Dynamics (People and/or Alignment) — Your team needs more than just the right skills — it must also be a learning organization that can respond to change and adjust accordingly. Your team also has to be on the same page regarding customer priorities and operational challenges.
7. Insufficient Pipeline — One key piece of data to measure the health of your company is your pipeline coverage ratio. How much new business has your company identified and qualified compared with its committed revenue plan?
8. Ineffective Sales Process and/or Sales Productivity — There are two important measures of Sales effectiveness: one is the close rate (percentage of qualified deals that get closed) and the other is the win-loss ratio. If these metrics look reasonable, it may be better to analyze other parts of your growth engine such as the pipeline.
9. Poor cash flow restricts Capital Availability — If your business model defines a future stream of profits and cash flow, how much would you be willing to pay to own a piece of that business, considering the risks associated with getting there? This is the question for venture capital and private equity investors.
10. Inattention to the Transformation of Customer Behavior — Due to the internet, access to more information than ever before, and the ability to real-time price compare, today’s customers are different — transformed. They are the new experts. And companies need to focus on being “first choice” with customers. If customers are not satisfied, there will be no repeat purchases, no referrals to other prospects, and no feedback to guide product improvements. The key is an early warning and response system.
11. Poor Delegation and Scaling — Common chokepoints to sustainable growth include the inability to scale key processes, people and knowledge; and key players who are unable to delegate all but their unique and valuable contributions to your business.
12. Poorly developed Infrastructure/Systems — Systems set you free as your business complexity increases. Just like the formula in biology that states when a cell divides in two, the degree of complexity grows twelve fold; growth in your business creates a geometric rise in complexity.
Are you focused on building a better company with sustainable growth and greater value? Contact me today for a discussion on how you can overcome your growth barriers.
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