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3 Obstacles To Scaling A Business (That Business Owners Fail To Recognize)

Written by: Jeremy Han, Executive Contributor

Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.

 

In my last article, I discussed the 3 secrets to scaling a business. In this, I explore the other side – 3 obstacles that can derail your growth plans.


In my conversations and work with CEOs, whenever the topic on growth arises, the focus has always been on strategy, sales, products, markets etc. However, there are other equally important areas that a business must take note of if it wants to scale. In fact, these are the issues that could potentially make or break a company no matter how good your strategy or sales are. So what are these ‘silent killers’ that could derail a business from achieving its fullest potential?

The first ‘silent killer’ I would like to discuss is your cash engine. Scaling a business needs cash! Lots of it! It is like fuel for an engine.


Have you ever encountered a situation where a business is making a lot of profits but has no money in the bank? Or growing revenue so quickly they ran out of money?

So what is your cash engine? Picture a plane with an engine – it could only soar if its engines are fully functioning. Is your cash engine running properly?


Your cash engine is the set of business activities that not only generate cash but also moves the cash from your customer’s pocket into yours. So this is where it gets interesting because most companies would make two fundamental mistakes about their cash flow when they do not realize that what is key here is how much money you have in the bank, not how much money you have on paper.


The first fundamental mistake is to leave the cash flow issue to your accountants. Accountants manage your Profit and Loss statement, which is the end result of your business activities, but they do not have oversight over your business model i.e. how you run the business day-to-day. And cash in bank is the result of how efficient your business model is because it tells us how fast we can capture value from our customers. So who has oversight on the business model? The management team! Yet management teams by and large do not discuss cash flow issues, or talk about how much money they have; choosing to leave it to finance or accounts.


The second fundamental mistake is linked to the first – because when the management team does not talk about the cash flow in the business, they tend to ‘blindspot’ the chokepoints that stop cash coming to you! One of the companies I worked with had two departments replicating the entire same process with the client, so the entire product development process was 30 days more than necessary, which meant that they were delaying their billing by 30 days! They did not discover this until I got the management team, which comprises of the different team heads to map out their work and how many days it took to complete it before they could bill the client, which meant that money had been coming back late 30 days for no good reason!


So how do you make sure you have a tight oversight on cash flow? In the award-winning book Scaling Up: Mastering the Rockefeller Habits 2.0, Verne Harnish introduces us to the concept of the Cash Conversion Cycle. It comprises of 4 parts. Breaking it down to these 4 stages helps us gain clarity on who can be work on shortening each part of the cycle. Accountability is the key here.

The next ‘silent killer’ I want to discuss is Execution discipline. Like cash flow, execution discipline is misunderstood to be something else, and as a result, management focuses on the wrong thing. Execution discipline is different from operations, which is the process by which business is done. Execution discipline is something more pervasive – it is the culture, habit, or mindset of getting things done i.e. turning plans into results on a sustainable basis. Many businesses spend a lot of resources on improving business operations with LEAN methods, KAIZEN, etc because the business operations processes are measured. However, what leaders don’t measure is how often business plans are executed well and turned into long-term results.


As a result, business leaders often complain to me of how strategic plans stay fruitless because everyone is too busy fighting fire all the time. One CEO of an international electronics company lamented to me how every year his corporate planning team spends a lot of time creating strategic plans for the new year but nobody executes them, and year after year, those plans that would take the company to greater heights remained unexecuted. Worst of all, he said he could not blame anyone because everyone is working ‘hard’. Is working hard equal to being effective?


Unfortunately, they are working hard fighting fire in operations, not turning strategy into results. So how do we ensure this ‘silent killer’ does not derail your scaling-up plans? Learn to see the issue for what it is – a management habit of knowing when to focus on operations, and when to focus on executing strategy. These are two fundamentally different issues. It is a culture problem, but if this habit is built at management level, it would cascade downwards and every level would become more effective at achieving the company’s longer-term goals.


The third and last ‘silent killer’ I want to talk about is success. Yes, you heard right – success if not handled properly can be the next step to failure. Why? This is because success breeds a certain mindset that prevents future success. This mindset is called “Playing not to lose.” This is when teams start to think that they have already arrived, and what they should do is to maintain the current success. In my experience, this could be due to various reasons. One could be because the management team had succeeded beyond their dreams, exceeding what they once thought possible and thus they no longer feel that they need to push on to the next boundary.


Or another reason could be a lack of vision or a lack of purpose that drives the leadership to constantly break boundaries. This could be so when leaders become too focused on the Excel sheet; they define the entire business and its life cycle solely on numbers, so when the numbers look good, they ironically lose their vision. The Excel sheet is a good tool to manage the numbers of the business, but it does not convey vision, it does not challenge us why we need to seek the next horizon to cross.


I advise business leaders that the best time to disrupt themselves is when they are doing well when their finances are in a strong position to take risks. However, it is human nature to try and breakthrough only when things are going downhill, but by then it could be too late for some companies. Do not fall into the ‘Play not to lose’ trap if you are successful, because the best is yet to come, no matter how good you are. Do you have a clear and compelling purpose that transcends financial results, and would make the hair on your neck stand when you contemplate it? Find that reason, communicate it to your team relentlessly so that the whole business is constantly focused on a goal that makes you stay hungry and learning.

So if you are a business leader who is gearing up your company to scale, think about these three points I mentioned. Do not let these ‘silent killers’ derail your ambitions to scale!

  1. How involved is your management team is analyzing and improving cash flow? Does the team know what the cash position of the company is and regularly discuss its implications on growth?

  2. Is there drama in the company when it comes to executing strategy and holding people accountable for outcomes? Does everyone know what to do, when to do it, and when to report it?

  3. Do you constantly ask the team why we do what we do, and what the next horizon is if we want to be a great company, an organization that is more than just one that makes money but also makes a difference?

You may want to sit down with your team and discuss these questions. Find out what they think, and then decide what to do next. Exponential growth is possible if you know how. And you do not have to do it alone. We have tools and resources to help you.


To learn a proven methodology, scan here to sign up for our free online course 'How to Scale Your Business'.






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Jeremy Han, Executive Contributor Brainz Magazine

He is a certified Scaling Up coach with Gazelles International, specializing in coaching executive teams of scale-ups across the world to maximize their profits and their impact. His clients are companies in Australia, Singapore, Indonesia, Vietnam, Myanmar, Malaysia, the Philippines, China, Hong Kong, Taiwan and Nepal in a diverse range of industries. They range from publicly listed conglomerates with revenues above a billion dollars to fast-growing scale-ups between $10m - $800m in revenue size. His personal mission is to help 100 CEOs, in 10 years, to impact 100m people. Besides business growth, he has helped companies to set lasting legacy goals that spur both dynamic growth and long-term impact. Some of these goals include creating 1m jobs in 10 years, clothing 1m people in 10 years, and enabling 1m under-privileged children to attend university in 10 years.

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