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Annalese Sharrock

Annalese Sharrock Strategic Director

Annalese@strategycollective.co.nz
021 615 364
06 759 7044

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Business Growth vs Stability

Becoming the next Google or Airbnb might be the goal for some business owners. Others are happy with building a sustainable family business that provides a stable source of income. Both are great goals and share many similarities when it comes to the fundamentals of business strategy, but where they are unique, particularly when it comes to approaching the finances.

Stephen Hill, Chartered Accountant and head of our Accounting team at Strategy Collective, says that each business is on a 1000 steps journey. “The difference is whether that 1000 steps takes you to the summit of Everest or whether it’s a less risky journey around base camp,” explains Stephen.

“The key for both businesses is for the owner to have the confidence that they have a viable and sustainable business, regardless of what their end game strategy is.” He goes on to explain that that confidence comes from different avenues depending on your end game.

Stability: Enjoying the Scenery

Stephen explains that the business owner who adopts the “stabilising” business strategy will want to have a solid grasp on two tools:

  1. Financial Forecasts: Being able to plan for the future by having reducing uncertainty around future incomes and outgoings.
  2. KPI Measures: Having the systems in place to track the reality against those forecasts is vital for any business owner so they can adapt fast and steady the ship if things go awry.

Why does a tightrope walker hold a long pole as an extension to their outstretched arms? To gauge any slight imbalance before it’s too late. They can sense the pole drop slightly to the right, make an equally slight correction, and, thus, stay on course.

Stephen’s tools of forecasts and measures do the same job as the tightrope walker’s balance pole.

Growth: Pushing for the Summit

Facebook didn’t become Facebook because Mark Zuckerburg just spent more time plugging away at his laptop—it took investment, risk, innovation, staffing, out-sourcing, collaboration, and much more to develop the social network’s capabilities to be the online home of choice for 2.2 billion users (as of Feb 2018). So, you need to put in place some rungs on the ladder or footholds from which to build your capability and, in doing so, establish that all-important confidence that Stephen mentioned earlier.

Stephen explains that for each growth-minded business there will be a range of factors to put in place, including (but not limited to):

  • Working Capital: Your ability to cover your day-to-day expenses with your current assets. Do you have plans for ensuring adequate cash flow as you grow?
  • Fixed Capital: This is your investment in fixed assets (like buildings, infrastructure and equipment) which increase your capability as a business. Consider what larger ovens might do to increase the capability of a baker or more tables for an over-booked restaurant or more pasture for a dairy farmer.
  • Additional Suppliers: You’ve won your first supermarket distribution contract. Great! But can you service the huge orders that are about to come in? Will your current ingredient suppliers cope or will they leave you in the lurch?
  • Innovations: Online there are a plethora of examples of businesses who have scaled their capabilities thanks to innovations that take one product and make it available to the masses—the e-book or online course is a classic example.
  • Efficiencies: One of the strengths of bigger businesses is their ability to leverage economies of scale and create products at lower costs, increasing their margins. What efficiencies can be made as your company grows?

Stephen stresses the importance for business owners to grapple with these questions and use the answers to fuel their confidence going forward. It’s empowering when you see your goals, the numbers and your business strategy all align, says Stephen.

Enlisting a Business Coach

Ensuring you have an experienced business coach with you on the journey is like recruiting a mountain guide before venturing into the Himalayas. When the steps get tough, they are there to give you the encouragement and confidence to take that next step.

Our experienced business advisors have walked the route many times and can bring their experience and expertise to your business journey, helping you through the pain points and to reach your end goals.

 

Book a Free Chat With Us

Let’s grab a coffee and throw ideas around on how to take your business to the next level. 

These 45-minute chats are obligation-free and suitable for every stage of business. Choose from one or several of our departments or just talk general business strategy (hold Command or Control to select more than one).

 

Watch Stephen Hill’s explanation of the growth vs stability business strategies.  

Photo by Alena Koval