Management of Business Growth - Literature review Example

MANAGEMENT OF BUSINESS GROWTH by Course Professor Institution City and state Date Management of Business Growth Introduction Entrepreneurship is an important area of concern for managers in business today especially in an ever changing and dynamic world. It is particularly important to consider aspects related to managing growth in business in relation to innovation, risk, and achieving sustainable advancement (Alsos et al, 2014, p. 97). Any business that hopes to be sustainable should aim to grow and grow fast in relation to how fast the playing field keeps changing. Once a business can achieve growth, most other aspects will most often fall into place. Alsos et al, (p. 667) observe that most of the time, growth, and rapid growth of a business entails strategies aimed at managing the challenges that come with growth and scaling which translates to myriad managerial challenges and implementation of strategies aimed at making this growth sustainable. The business, in the process of growing has to encounter organizational changes that have to be managed in order to achieve success. This paper is going to look at the entrepreneurial concept of managing business growth in relation to available literature that comprehensively evaluates the issue. In this respect, the paper will analyze published literature and information in relation to managing entrepreneurial business growth and give a critical review of the issue. Literature Review Business growth is one of the most addressed subjects in entrepreneurship. This also means that the subject is normally shrouded in myths and assumptions that can give erroneous beliefs, which consequently hurt a business’ attempts at growing (Barringer, 2012). Growth is good in the sense that a business that does not grow will most likely die. Growth is a linear function largely dependent on strategy (Bridge and O'Neill, 2012). In this respect, it is important to understand that growth can be good or bad for a business as growth can create value for a business but if the process is not managed well, it can undermine the value of a business. Burrows (2015), notes that growth can result in undermining the value of a business when the speed of the growth surpasses managerial capability. Chesbrough (2013) says that it may thus place undue stress on the financial health of the business, aspects such as quality control and the processes of the business. The result of such a situation would be a dilution of a business’ client value proposition or steer the business into a very different competitive realm. In the case that unmanaged growth takes the business into a different competitive space, the business may find itself competing with better or more established businesses, which is a losing battle since it, is not yet equipped to deal with this kind of competition. This also means that the business will be placed in a position where it cannot have a competitive edge or advantage (Christensen, and Raynor, 2013). Businesses must assess their preparedness for growth and know how to manage growth, as it can be a blessing as well as a curse. The lack of proper management of business growth results into a crisis for an entrepreneurial venture especially if a business did not evaluate and plan properly for it in the beginning. In evaluating preparedness for growth, a business needs to ask if they can deal with the changes and challenges that come with growth. It is important to note that growth will place stress on the existing processes of a business, for instance, it is bound to stress employees, stakeholders, controls and business processes. In addition, growth will need the entrepreneur to essentially change into a manager and then a leader if the process is to be successful and sustainable. In this sense, the growth of a business will also change the day-to-day aspects of an entrepreneur’s life and the actions they take towards advancing their business. Most entrepreneurs find the change to be challenging as they had not evaluated their preparedness concerning growing their business. They fail to understand that growth fundamentally changes every aspect of the business. An entrepreneur therefore needs to ask himself or herself if they are ready to grow, the scale of growth they are aiming at, if they have the correct and right processes in place to support growth. This means they have to evaluate their financial capability, their employee base, expertise needed, and processes involved in the business. They also need to determine the risks they are likely to encounter in the process of growth, the pattern they would like to adopt and the pace at which they will move. In this respect, an entrepreneur needs to ask themselves some fundamental questions before they embark on growth. They need to ask themselves if why they need to grow, how they plan to grow, the pace they will adopt towards growth, and the magnitude of growth they aim to achieve. They will also need to ask is they have the right people, if the right people are enough to support growth. In case the right people are not enough, they need to consider if they have the correct hiring and training processes in place to support growth and if they have sufficient financial and quality controls. They will also have to consider the possible risks that will come with growth and how to manage the challenges they are bound to encounter. Any change in a business has to come with risks and challenges that have to be mitigated if the business is to survive. In managing business growth, entrepreneurs have to consider how the risks associated with growth will affect the different aspects of the business such as effect on their culture, the experience of their clients, the services they offer customers, the flow of money, stakeholders, supply chain, delivery, and distribution. If a business considers these aspects in terms of risks, it will thus find it easy to come up with strategies aimed at mitigating them. The management of business growth also needs a way of monitoring risks in a periodic manner, which requires adequate information. This ensures that a business in their growth process can monitor the pace of growth and adequately evaluate what is working and what could be hurting them. The growth of business will always face a myriad challenges but these challenges can be mitigated if an entrepreneur is knowledgeable about growth management and the risks involved in the process. This means they have to learn how to keep up with the market, learn how to plan, manage the flow of cash and financial aspects. They also have to learn problem-solving skills and have the right systems in place while at the same time welcome change. Steps to Managing Growth According to Thurik & Wennekers (2004), the first step to managing business growth is knowing when to grow. This entails constantly reassessing a business’ operational factions to determine the correct time for the advent of growth. An entrepreneur can only institute growth in a business when all the indicators point to a ripe time. Such indicators for growth include the demographics of the market, the financial stability of the business that have shown a sustainable trend and the success of the services and products offered. When these indicate a readiness towards growth, then an entrepreneur can move towards advancing or instituting growth. The second step entails planning for the actual growth process. In this respect, it is vital to know what is to be achieved in the business. An entrepreneur in a bid to successfully plan for growth should be able to state the objectives and goals of the business I a concise manner. In as much as the plan of the business is long and detailed information with all the minute details, he plan for growth should be short and concise to enable clarity of actions to be taken towards growth. The step of planning for growth also has to include contingency actions in the case that the plan fails to go as expected. This will help an entrepreneur in knowing when to change strategy or abandon the plan and look to other alternatives. The third step involves financial aspects. The management of growth in a business is heavily dependent on financial growth and sustainability. An entrepreneur and a manager in this capacity have to have the relevant knowledge entailed in managing finances. If cash flow is not managed well, the business runs the risk of destruction and failing to achieve growth. This aspect may need the business to raise equity capital from stakeholders and investors or look into lenders. It is thus important for a manager in this capacity to ensure good relationship with investors and lenders. Transparency and integrity are vital components through the development of a business that will ensure the business can source for growth funds when the time is ripe. The next step involves delegation. Many entrepreneurs erroneously think that in managing business growth, they are capable of handling everything. It is important to delegate. This means investing in reliable people that can be trusted. It also means requiring the people to insist on quality and this may mean needing a report from them periodically to assess how growth s developing to be in the know. In this respect, an entrepreneur and manager has to critically evaluate not only the expertise and skills of the people hired but their attitudes. This will be geared towards reinforcing the values of the business such that delegation will achieve the underlying objective of growth. The last step is analyzing the growth itself. It is important to find out if the growth of the business is as a result of the instituted changes and implementation of strategies of the business or if it is from a different angle. This also ensures the management process of growth can evaluate the different aspects that have advanced growth. Growth sometimes can cover problems if an in depth analysis is neglected. For instance, it may be that a business is growing simply because the market does not have current competition or the business is concentrating on one product. In considering steps to managing business growth, the model below simplifies the goals or areas of concern when managing the growth of any entity. Reducing Financial Risk Cost Inefficiency Improving Skills Information Processes Creating Strategy Systems Processes Increasing Credibility Visible Cash Flow The model above shows segmentation with the four fundamental areas and associated aspects that an entrepreneur must focus on in the management of business growth. Managing growth should focus on reducing financial risk, cost, and inefficiency while improving skill, information, and related processes. Managing business growth also requires creating workable strategies, processes and system and increasing credibility and cash flow. The graph shows a simplified graduation that a business goes through in growth. The start up of any venture is at zero when the business is still a concept before it moves to the pilot stage where the seed of the business is established. The roll out is the first stage of a business where the business is set in operation and growth is ready to be implemented. Achieving growth successfully moves the venture to a stage of expansion before the business moves to the last step which is maturity. The stages follow one another in progression and as such, successful management of growth of a business has to ensure that the graph is on a continuous incline. Conclusion Managing business growth in entrepreneurship entails myriad aspects that have to be critically analyzed to achieve maximum benefit to the business. Growth is often viewed as a positive aspect in business. However, if not managed well, it can present the business with pitfalls that are hard to recover from in the future. It is important for entrepreneurs to plan for growth and look into strategies that cover all aspects of the business that will be affected by growth. This is because, business growth affects all sections, and a process of a business as the business is transitioning into a bigger realm. In growing, the business is in a different level and aiming to move into a higher-level most of the time. Growth is progress and progress means changes. Most of the time changes mean challenges and risks. Management of growth in business ensures that these challenges can be dealt with effectively to maintain the sustainability of the business. If growth is not managed, the challenges and risks that come with growth may engulf or overwhelm the business. Entrepreneurs have to know that advancing growth will essentially turn them into managers and leaders and they have to be ready for these roles if they are to drive the business towards successful growth. Any entrepreneur who wants to grow their business therefore should first look at their capabilities before they even try to grow. 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