Growth as a reason for failure of small and medium enterprises

What makes one business more successful than others? Theory gives many answers but what about a practice, what does it say? From theory to practice it’s a long way. Challenges are numerous.

For those companies in a growing phase especially this phase of growth is the most-risky one. While developing and chasing for profit, market, clients, … many entrepreneurs all of sudden find themselves stuck in a fog of problems. Many of them never find a way out and by default always is someone else fault for their failure. If we don’t talk about outside factors like economy and political crisis, disasters etc. which we can’t influence on, everything else is up to us. Perceiving potential risks is one of the major tasks for each of those who wants, starts, leads businesses. 

There are two key factors, one is relation between growth and management capacity on one side and a company’s response to new competition on the other side.

Naturally, the goal of every entrepreneur is that his company grows and thus increase profits, increase efficiency, productivity, strive for market leadership, etc. At the company’s start up, one of the key success indicators is a growth of sales revenue. In an early stage of growth SME’s are sensitive financially and organizationally. The owner / manager must see and have a clear perception of how much his company can grow, and therefore must control and manage dynamics of growth. Otherwise, growth can jeopardize business and lead to business failure.

Achieving company growth is possible only through strategies of market diversification or expansion. Both variants lead to increased competition. One of the essential factors when making decisions about starting a business and later planning its growth and development, is competition. Information about competition is crucial. Also, when planning business growth, the growth of current but also of potential competition should be taken in account and perceived.

As the company is growing and developing, number of activities are also increasing and consequently increases the number of employees. Here it is important to emphasize that the owner / manager who makes decisions and selects new employees, recognizes and engages qualified and professional ones. Very often, decision makers are guided by one thought and that is how to go through this recruitment process as cheaply as possible. This is one of the most common mistakes that and in the long run, leads to many business problems.  Even though this is clear to everyone long ago, that human resources are the essence of every business, that investing in professionals is not a cost but an investment, it seems that in practice denies this. Many employers are merely declaratively saying it but do not practicing it. Practice often shows that just because of this attitude, small and medium enterprises face problems that they cannot recognize and which are reflected in the inability to provide quality due to insufficient capacity, overburdening of staff or their ignorance. In this regard, even in case of increased demand for products/services, this will not be of any use because quality will be on a low level and so clients’ dissatisfaction.

So, businesses are built on relationships – with team members, customers, suppliers … Build a team and surround yourself with people who have skills you lack.

The most important thing is that the decision maker manages the growth and predicts to what level and at what speed the business can grow. This is especially important for start-up businesses.

The key word is continuous ANALYSIS and not only analysis of the business itself but also, people starting from the owner/decision maker.

The challenges of business growth

Regardless of size, all companies face similar problems. We cannot influence general economic situation, tax and legal regulations, but there are parameters that are desirable to measure and control.

Of course, one the parameters that should always be analyzed and monitored in the first place is – money. Revenues, expenses, cash flow, liabilities, collection… Most common challenges that small and medium companies are facing are:

● how to establish a stable cash flow,

● how to balance liabilities and billing,

● how to automate transaction tracking.

It’s useless to say that nowadays use of software is practically a must One of the effective solutions is to use specialized software for tracking money transactions within the company. Using software for monitoring of cash flow is more accurate and gives easier insight what is happening in balance sheets.

Also, decision maker has to have an idea of ​​business weaknesses and what should be monitored to prevent the existing system from collapsing. Using appropriate software solution, providing the right information at the right time, enable owners/ managers more easily and simply to monitor and plan changes in the business. In addition to cash flows, human resource planning, staff development allocations, benefits, etc. must be considered when planning business growth.

If there is a way to predict the business future, specialized software for integrated business has a large share in that. Not only does it facilitate your day-to-day business activities, it also allows you to progress faster and more stable with efficient and rational use of resources.

The growth of your company must be supported by the right tools. Having software that, in one place, connects several different functions and sectors is one of the biggest advantages you can gain over the competition.

Conclusion

Once you have started your business, you already showed that you have courage (very needed these days) to take a risk and try to make your business idea come to life. Now when your business is developing, its needed to be realistic and vigilant in every step you are making while growing your business.

We in AMR Global Advisors can help you deal with critical events as they occur. Our experienced consultants can guide you through all business phases and provide advices and different kind of services like business analysis and recovery, improvement of financial under-performance, cash flow management, etc. 

We will support you while you are expanding your business ideas providing advices on market issues, strategy development, financial management and many other important business segments. 

Dedicated to your success, we remain at your disposal.

AMR Global Advisors

+382 69 01 14 14

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