Six obstacles to business growth

It is often said of start-ups that the first year loses money, the second year breaks even and the third yields a profit.

All too often, entrepreneurs believe that if they can make it to that all-important three-year milestone, their biggest obstacles are behind them, writes Tony Price, interim CEO (UK) of chief executive development organisation Vistage.

However, a successful start-up and a successful company are not the same thing. Too many businesses thrive at first, only to run aground a few years down the line.

In my experience the same obstacles crop up time and again, coming between early victories and sustained expansion. Here, I’ve outlined what they are and how to get round them.

1. Navigate the rivers of cash
Locating the “rivers of cash” is crucial for the survival and growth of any business. So why do many entrepreneurs fail to do this successfully? In some cases they have not identified which products, services and customers generate the most cash. Others are unaware which rivers are drying up – and how swiftly.

2. Release that death grip on equity
It is understandable that entrepreneurs like to hold on to as much equity as possible. However, this attitude can become a stumbling block once a company begins to grow. In many cases, an equity partner is a good investment in the long-term. After all, which is better: 100 per cent of nothing, or 25 per cent of a big success?

3. Hire the right people
If you are recruiting for a start-up, it can be tempting to hire people you like – even if their CVs aren’t up to scratch – or try and save money by plumping for cheaper candidates. However, the simple truth is that although the best people command higher premiums, the extra investment is usually worthwhile.

4. Pay attention to detail…
Increasing sales? Wonderful. Plenty of new business? Terrific. But some entrepreneurs become so carried away by their initial successes, they lose sight of the processes and performances that made these feats possible in the first place. Any oversights or shortcomings need to be flagged up as early as possible, so keep measuring those key performance indicators and producing those reports.

5. … but don’t go overboard
Good entrepreneurs work on the business, not in the business. They don’t stand over their employees, but encourage them to act on their own initiative. They aren’t preoccupied with the time-consuming tribulations of day-to-day operations, because they have trained their focus upon what is going to happen next year, and the year after that. Their concern is the future, rather than the present.

6. Don’t be a myopic visionary
Entrepreneurs tend to be driven, determined people blessed with unwavering self-belief. This is why they are entrepreneurs. However, in certain cases these same qualities can result in short-sighted attitudes and resolute refusals to listen to others. Fresh perspectives provided by others may well, if ignored, lead to missed opportunities. Worse still is when a business enters difficulties, and the entrepreneur reacts by ignoring all advice and ploughing on regardless, following their “vision”. In many cases, it leads them to a brick wall.

Even the most successful entrepreneurs admit that the path to success is a rocky one. It goes without saying that the sooner challenges are identified, the more swiftly they can be addressed. With the right preparation, they can all be overcome.

Read Tony Price on the qualities of great leaders.

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.