Financial Data
Updated 01 Oct 2020

Considerations for internal expansion

Growing a small business into a big business starts with the business owner. You need to work ‘on’ your business rather than ‘in’ your business. You need to be able to step back, evaluate your business and devise a growth strategy – and you need to be able to implement that strategy.

Ask yourself these five questions:

  1. Do you want to succeed as a business manager or an entrepreneur?
  2. Do you want your business to flourish and grow? 
  3. Do you want a profitable business?
  4. Do you want to have more control of your time and feel that what you do really has impact?
  5. Do you want a proper exit strategy, in which your business is worth something substantial when it’s time to sell?

Here’s the problem. While most business owners would answer these questions emphatically ‘Yes’, few are either deliberate or proactive in their business.

The reasons behind failure

The average small business follows this cycle: You buy or launch a business. Initially, to keep costs down, you hire no employees. You do almost everything yourself, developing products, making sales, servicing customers, issuing invoices and even keeping financial records.

As an entrepreneur who wants to grow something great, you work hard. You want to win more work and that requires you to work even harder. You get busier and busier, working hours beyond normal workdays, just to get everything done.
Here’s the problem: This level of activity is not sustainable.

You will get tired, your family will start to complain and your initial upbeat attitude will flag. More to the point, your business won’t grow as long as you are trying to do everything yourself.

You start to miss a few deadlines. You fail to return calls or emails, and clients who were initially very impressed with your service begin to wonder what’s happened.
There are three choices at this point.

Some business owners realise that this pace cannot continue, and after some self-reflection they decide to scale back and operate at a more sustainable level. They’ve basically decided to keep their business small and a ‘one man band’.

Others don’t critically evaluate their businesses and continue to operate at the same frantic pace. Because of declining service levels they soon lose clients anyway, and the business stops growing.

The third option is the business owner who consciously stops working ‘in’ the business.

To break out of the cycle described above, you need to make a transition from working ‘in’ the business to working ‘on’ the business, which will allow you to make strategic decisions instead of just operational ones, and ultimately lead to growth.

What does working ‘on’ the business entail?

  • Taking time out from the day-to-day operations of the business to focus on critical bigger picture issues.
  • Once these issues are recognised they can be implemented. These include implementing proper structures, systems and skills development. 
  • Ultimately, you need to build a platform for growth within the business that is not dependent on any single person for success.

Tip: Leaving a legacy as an entrepreneur requires you to learn this simple lesson – the business needs to be bigger than you.

There are many stumbling blocks that can prevent a business owner from working ‘on’ the business. These include:

  • While entrepreneurs have the discipline and effort it takes to work ‘on’ the business, it also doesn’t come naturally. The natural default for most people is to work in the business, and before they realise it they have fallen prey to the ‘sucked in’ syndrome, spending all of their time on operations, and none on strategic thinking.
  • There are many reasons why people avoid working on their businesses: these include a lack of time; a desire to keep the business from becoming too bureaucratic or corporate; and some simply don’t realise the difference between working in and working on a business. 
  • Many business owners simply don’t really understand how to work ‘on’ the business. An entrepreneur might decide to devote a morning a week to working on their business, but then they become uncertain what to do in that time - which means they default to once again focusing on operational issues, like dealing with a client or preparing invoices.

Tip: Warren Buffet said that “Chains of habit are too light to be felt until they are too heavy to be broken.” Don’t get too used to doing things that don’t add value, but waste time and money instead. This will only lead to you becoming trapped in a downward spiral – for yourself and your business.

Getting started: working on your business

Working on your business is a cyclical process. It involves thinking and making decisions about strategy, designing and implementing new structures, and facilitating the development of new skills.

1. Devising and implementing strategies

Take a step back and make some decisions about where you choose to operate and how you plan to win in those areas.

It’s easy to get swept up in what customers want, and when this happens, many business owners don’t take the time to step back to question whether their business is heading in the right direction.

Does this sound familiar? You invested a great deal of time and energy devising a strategy for your business when you first launched, but you haven’t revisited your strategy since your business began operating.

Note: You’re in a much stronger position to make important strategic decisions after your business has been operational for a while. You now have experience in your industry, and greater insight into your markets, alternative business models and competitors. So why aren’t you revising your strategy?

There are five key issues you should be addressing in the strategising phase of the cycle: values, markets, competitive advantage, activities and goals. Ask yourself these key questions for each issue:

  • Value: What value are we creating, how are we creating it and for whom? How can we continue to create value in the future?
  • Markets: Are we operating in the right markets? Which markets will we focus on in the future? Where should we grow, and where should we exit?
  • Competitive advantage: Are we winning in our markets? How can we have an even bigger competitive advantage in our markets now and in the future?
  • Activities: What are our business’s core activities? What do we choose to do and not to do?
  • Goals: What are our goals for the next 3 – 5 years? And what do we need to do to deliver on them?

2. Developing a structure

Effectively delivering on a strategy requires structure. The most basic definition of structure is the right people in the right positions doing what is required to make the strategy happen.

You don’t need to be a big business to benefit from structure. For example, if you’re in a small business with just one partner, structuring involves identifying your individual responsibilities and choosing what to outsource to external service providers.

In a larger business it’s about giving each person in the business a clear understanding of what they are required to do and how they will be held accountable for carrying out those tasks.

As a business grows the owner can easily lose sight of what everyone in the company is doing and this can result in a lack of accountability, duplication of work, and even an overload for certain key players.

It’s important to review the structures and lines of responsibility of each business partner, manager and employee to establish an efficient and effective organisation that can deliver on the strategy. Ask yourself these questions:

  • Skills: What skills do we need in the organisation to deliver on the strategy? Do we currently have the right skills? Where can we find the missing skills?
  • Roles: Describe each person’s roles and the responsibility that goes with that role? How do we put people in roles that leverage their skills and enable us to deliver on our strategy? 
  • Accountability: How will everyone be held accountable for delivering on the requirements of their roles? Who will do the measuring? What will we measure? How often will we measure performance?

3. Developing skills

Systems depend on people, and for people to operate effectively they need the right skills-sets. In many cases this involves training. Skills development and training are critical elements of working on your business.

Without training and developing people, your efforts in structuring and systematising your business are likely to be in vain. Ask yourself these key questions before you begin:

  • Performance requirements: At what level do I need the various people in my organisation to perform in order for the business to be successful?
  • Performance gaps: At what level is everyone currently performing? What are the gaps in their performance between what is happening and what is required?
  • Training priorities: In what order should I address the skills gaps for maximum success and the survival of my business?
  • Training methods: How should I address each of the skills gaps? Which gaps are best addressed through formal training and which through on-the-job coaching and mentoring? Who will I get to do all the required training?

Note: The process of working on your business by strategising, structuring, and developing skills is a continuous cycle. Once you’ve been through the cycle and you’ve developed or refined your strategy, created a structure, and developed and trained people with the requisite skills, you then need to start again with development and refinement of strategy. Put a system in place that allows you to continuously go through the cycle. This will allow your business to grow.

4. Putting systems in place

To build a business with a real platform for growth, it’s critical to first identify the key activities relating to that business, and then to build systems that allow those key activities to be replicated effectively and often.

When most businesses start out, entrepreneurs perform these critical activities in the business themselves. Facilitating real growth thus requires them to create a set of processes that others can execute.

Businesses require systems and processes that relate to product or service delivery, marketing and selling, buying and product development, and financial management and reporting. Ask yourself these questions:

  • Key processes: What are the key processes that create value for our customers and allow our business to run effectively and efficiently?
  • Procedures: Do we have established, documented procedures to deliver on our key processes easily and often? For which of our key processes do we still need to establish and document procedures?
  • Automation and outsourcing: What could we automate to reduce the dependence on people? Are there procedures within our processes that could be more effectively executed by external organisations?

5. The transition

In order to grow, you need to make the transition from spending all your time working in your business to consistently dedicating time to working on your business. Smaller business owners should aim to spend 20% of their time (which works out to one day a week) working on the business.

Larger business owners or managers within larger organisations can aim to spend as much as 80% of their time working on the business. The amount of time you aim to dedicate to working on the business depends on the size of your business and how much you want it to grow.

The higher your growth aspirations, the more time you should spend working on your business.

If you are caught in the trap of working almost entirely in your business, you can make this transition over time. Start by setting aside two hours a week to work on your business.

In your first two hours review your strategy. In the second examine your structure. In the third evaluate your systems and in your fourth consider your skills development.

In month one of the transition you should establish the platform for working on your business. In month two dedicate three to four hours a week to working on your business and take the time to address some of the issues that were identified in the review sessions in month one.

Work with other senior people in the organisation on these issues. As you move into month three, try to dedicate a full half a day a week to working on your business and continue to increase the time you spend on these issues over time until you are working on strategy, structure, systems and skills development for a full day a week.

Noticing the effects of this transition

  • In year one you will have a happier, more empowered, more focused workforce.
  • Customers that you personally have nothing to do with will be raving about your company’s service. 
  • More time for yourself means you are able to approach work in a more balanced way.
  • The business will be growing in a sustainable and profitable way.

“If you go to work on your goals, your goals will go to work on you. If you go to work on your plan, your plan will go to work on you. Whatever good things we build end up building us.” Jim Rohn, business philosopher

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During the course of running and growing your business, you will need access to both short-term and long-term cash savings to pay salaries, suppliers, or even to save for a future project or large payment. Standard Bank provides a range of flexible Savings and Investment solutions, with competitive interest rates, to help you meet your business’s savings and investment needs.