Wednesday, April 27, 2011

Entrepreneur: 5 Common Pitfalls to Avoid to Grow a Business


You have all heard or seen entrepreneurs whose great idea has worked and the business has grown from leaps to bounds, the entrepreneur and the management team have worked very hard and opened 2 to 3 more branches, then suddenly the business stagnates or it starts declining. You then wonder, what went wrong.
The main problem is that in the beginning, most brand new businesses focus on sales and because they want growth, they put their energy and money in revenue producing areas   like new product, new plants, new markets and more branches. Little or no money is put on infrastructure  or organizational framework  hence there is no system to provide the management with  the information and data  it needs to run  the ongoing day to day operations of the company  and to make  decisions about current and future  strategies for the business.
This is natural because the entrepreneurs want the business idea to work.
How then does an entrepreneurial start up make the successful transition to a rapidly expanding medium size company.
To achieve this greatness, entrepreneurial company must address the following 5 problems that come from within, namely:
  1. The ineffective deployment of human resources. In the early days of a start up, it is not essential to define job requirements or set up performance evaluations. You then find, that as the company grows the entrepreneur naturally starts giving the employees who have been with him from the beginning more responsibilities far beyond their level of experience and sometimes beyond their level of ability. The danger with this is that without developing a well qualified management team, the company becomes unable to respond fast enough to new opportunities and misses warning signs of trouble. Secondly, without job descriptions worked out in advance and an adequate salary requirement, expanding companies can very easily hire wrong people. Another thing that happens with expanding companies is that they tend to stick with the management structure they know rather than making necessary changes and adjustments as the company grows. You as an entrepreneur thus have to take note of the above tendencies in your expanding business to avoid disaster.
  2. Hesitancy to delegate. Entrepreneurs usually feel that they did not get where they are today by giving up control to anybody. They succeeded by being hands on and this behaviour pattern, the result of years of positive reinforcement is hard to change. The entrepreneur is hesitant to delegate. They know they are too busy to pay close attention to all areas and details of the business yet there is still the impulse not to give up any control. As the business grows you the entrepreneur must realize that you cannot do it all by yourself. The skills that propelled your new business to success are quite different from the skills necessary to grow an established business. Learn to hand over some control to trusted managers.
  3. Lack of appreciation of the employees. Most business owners and entrepreneurs fail to understand the emotional needs of their employees or the potential benefits   of motivational tools. Entrepreneurs argue that money is the primary motivator and use it as their main tool.Money is a motivator though not in the way that motivators such as achievement and recognition go. As the business expands periodic feedback and formal performance evaluations becomes important. When the number of employee’s increases, the entrepreneur will not be able to track everyone’s performance personally hence the evaluations and periodic feedback will help you the entrepreneur stay in control of a much larger organisation. Appreciation, opportunity, challenge and financial rewards motivate the employees, make the workplace fun and reduce staff turnover.
  4. Lack of long term planning When a company expands it is a sign that the company believes that it has a future. For many entrepreneurs the future looks very much like the present. The entrepreneurs focus   is traditionally on the short term. He wants to make sure that his concept works. Then once the concept is a success he wants to maximize on short term profits. The entrepreneur wants to expand but the model in his mind’s eye is often based on a replica of his original success, only bigger. The need for an entirely new model or even for extensive modification to his original plan is not something that the typical entrepreneur wants to face. Strategic planning the process by which business examine their strengths and weakness and devise plans for  both their short term and long term  growth is  the key to real expansion.
  5. Ineffective implementation of systems and technology. Entrepreneurs need to keep their hand on the pulse of their business. In the beginning, of course this means being involved in every decision, actually being able to visit all sites on a regular basis and actually seeing the customers and touching the product. However as the business expands, it becomes necessary to set up an information system that will give you the same ability on a much larger scale. An information system can tell you where your opportunities are and where your challenges lie and function as an early warning system when things are not going according to plan.
Almost every growing company reaches a point where hard work can no longer take the place of missing infrastructure. To expand, the entrepreneur has to break from some of the old habits.

To Your Success!
Patrick
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