Identifying and overcoming obstacles to growth

4/19/2011

The economic recession was a challenging time for most small businesses with many downsizing, cutting back on products and services offered or both, leading to an extended period of stagnation. However, small business lending is slowly beginning to improve, which means that entrepreneurs can finally begin to resume full-scale production and expansion once again.

As the American Express OPEN Forum recently noted, some business owners feel stuck in their current situation and aren't really sure how to resume growth and expansion once again. The source likens the scenario to treating a medical ailment: Companies must first find the source of their pain and then seek to fix it.

Identifying challenges

First thing is first, if businesses don't know why they aren't growing, then they won't be able to expand no matter how many commercial loans they take out. American Express OPEN Forum narrows possible challenges down to four common problem areas: Revenue, profit, work and management issues.

If small businesses aren't selling enough of their products or services, then revenue will suffer. Additionally, if they aren't covering their expenses on each sale and making money as well, then profits will be an issue. Management issues and overworking employees will also affect productivity.

Finding the cause

After small business owners have identified the impediment to their growth, they need to find the source of the problem.

For companies suffering revenue issues, the leading obstacle tends to be ineffectual marketing efforts. "Without effectively letting the world know about your product or service, you can't expect customers to come running to purchase your goods or services. Lack of effective marketing results in low revenues," explains American Express OPEN Forum.

Other probable causes include lack of differentiation from competitors, poorly designed management systems and client screening and profiling issues.

Addressing the issue

Once an entrepreneur has discovered the cause of a business' stagnation, he or she is in the ideal spot to solve the problem. If revenue is an issue, companies should look at running win-back programs to reengage previous clients and customers. The key to doing this is to stress how much the company has changed and tell clients why the offered services are still beneficial to them.

The source also suggests redefining a market for a product or service if differentiation is an issue. Customers are unlikely to switch service providers if there isn't anything distinct about them, so offering unique products and services can help them reach new consumers.

Finally, if low-quality clients are holding a company back, then entrepreneurs shouldn't be afraid to drop them. Clients that take up too much time or detract from the quality of work provided to others are a hindrance and can prevent a company from experiencing real growth.

Prepping for growth

According to a recent report from Office Depot, more small business owners are looking optimistically at their growth prospects. More than half of the polled entrepreneurs (56 percent) expect the economy to improve over the course of the next 12 months. With that economic improvement comes business growth, with 70 percent and 67 percent anticipating lifts in both sales and profits, respectively.

Still, many are concerned about the availability of commercial loans as the costs of operations increases as well.

"Small businesses remain the lifeblood of the economy, and while our survey shows that many are predicting growth this year, we continue to see them raise concerns about the costs of doing business," said Neil Austrian, interim chairman and CEO for Office Depot.