Why Businesses Stop Growing
Why Businesses Stop Growing
And What To Do About It!
The World is full of well-established small, medium and even large companies whose growth has stagnated or turned to decline. Indeed they are probably greater in number than those who are achieving consistent above inflation levels of sustained growth.
So why do so many businesses that have seen previous growth stop growing? It’s a question asked by many and whilst perhaps a simple enough one to answer, it’s often a far harder one to fix.
At the risk of over simplification of what is often in reality a quite complex set of conditions, there are perhaps three main reasons why businesses stop growing.
The first of these that the business has now reached the size that the business owner wants it to be and there is no desire to see any further substantial growth. This is for example true of many lifestyle businesses and is typified by the corner shop or by many craft based businesses.
Here the main aim of the business is to provide income and employment for the owner and possibly family members and often to allow the owner to pursue their personal interests, use a particular skill or simply follow a lifestyle choice. There are perhaps more of these businesses than any other.
The second reason is the unforeseen impact of external events or trends, especially those that fall under the PESTLE headings and are of a macro nature over which the business has little if any influence or control. PESTLE is an acronym for; Political, Economic, Social, Technological, Legal & Environmental.
Typical examples could be:
- Political – like a major change in Government
policy on import tariffs, taxation or funding
- Economic – say a national or international
economic crisis such as we experienced in 2008
- Social – a shift in social norms like the younger
generations extensive use of social media
- Technological – developments which obsolete
previous technologies as we have seen with the invention of digital cameras and
- Legal – changes like those we are seeing with
vehicle emissions and the drive to outlaw diesel engines
- Environmental – factors such as the move towards
renewable energy sources or the levy placed on the use of plastic bags in
Often we see combinations of PESTLE factors as politicians and legislators react to social pressure, technological developments and environmental change. Some of these PESTLE factors can literally kill an existing market overnight or cause a serious decline in demand.
It’s very easy for businesses to play the ‘external factors’ blame game, and whilst the economy, legislation, market down turn or Government may well be a contributing factor to problems, they are rarely the only reason. Indeed many stagnating businesses can usually point to a competitor bucking the trend and continuing to grow whilst they and others aren’t. As they say, every cloud has a silver lining.
The third reason is simply that the business leaders (s) are struggling to create growth in what otherwise seems to be a sufficiently substantial, sustainable and accessible market. Where existing strategies seem to failing to generate the desired level of growth and management are at a loss as to what to do next.
In turn these businesses may well be experiencing financial difficulties as costs rise but revenues fall or remain static. This situation is far more common than you might imagine and is one that keeps many thousands of business advisors and consultants in a job.
There are of course some classic causes for this, the most common being that the business owners and leaders have taken their eye of the ball and become more interested in thoughts of their retirement, golf handicap, their holiday home abroad or other lifestyle related matters.
Another major cause is simply that the business has outgrown the skills and management capabilities of the business leader(s) and an effective glass ceiling is in place until that person or persons address their own shortcomings.
Now this may sound harsh, but it is of course true and perhaps it’s the first ‘tough love’ statement that business leaders need to take on board. The biggest problem with this declaration is it implies either inadequacy, incompetence or complacency on the part of the business leader or leaders, which many will find a bitter pill to swallow.
But, it is only those leaders who are prepared to accept this and recognise that they need to change and develop new abilities are those who stand a chance of breaking their businesses out of stagnation or decline. To fail to recognise this and expect something miraculous to happen that will turn the businesses around is a high risk strategy.
Leaders who have broad enough shoulders to recognise that it is they themselves who are holding the glass ceiling above their business that is preventing growth, will be surely be those fastest to find a remedy.
What To Do About It
Whilst the above three reasons for why businesses stop growing are all correct, there are typically not just one but often many reasons which then collectively combine to create business growth problems. But in all cases it is the job of business leaders and management to resolve those issues and to place the business back onto a profitable growth track.
Sustained growth does not just refer to sales and profit, although that is a major factor. It also refers to the businesses ability to ultimately be able to grow without the need to increase its overall level of indebtedness outside of a carefully managed financial policy.
It equally refers to the businesses overall development and growth in terms of its people and other stakeholders and their combined ability to create a company of which they are rightly proud to be associated with and from which they all derive benefit and security. And not least in refers to the growth in the market value of the business and its long term return to its shareholders.
There are four main areas of any business where the absence of reasonable competence will cause businesses to struggle to grow and achieve ongoing sustainable growth. It’s these four areas that business leaders need to recognise and improve their knowledge, understanding and management skills around. It’s common that businesses will have issues in more than one if not all four areas outlined below as they are so closely interwoven as key aspects of business growth and success.
There is nothing magical about these four areas, they are common to every business and nothing more than the basic building blocks needed to create the foundations of growth. Indeed you will already be familiar with them and the terminology used, you may even consider you are doing them all already, no doubt you are.
The question is, how well are you doing them? There is no magic wand here just some tough questions needing robust answers. If your business is stagnating, declining or struggling for growth, one or more of your building blocks will have come loose, fallen out or not be effectively tied in to the others.
It’s your job as the business leader to rebuild your business ensuring the foundations are sound and a strong platform for growth. The chances are these foundation were in the past strong enough, but bigger businesses like bigger building need every stronger and deeper foundations.
The four areas are based on the M-A-S-C Market-Led B2B Development Model, or more simply the M-A-S-C Model, something which ambitious business leaders would do well to use when tackling any aspect of business development. The model is based on the findings of many hundreds of business growth consultancy projects undertaken by our team and the common findings we have made about what causes businesses to stop growing and conversely what they need to do to kick start growth.
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