Chapter 17 Not Standing Still – The Rainmaker

CHAPTER 17

Not Standing Still

In an increasingly competitive global business environment, a manager’s ability to identify and seize new opportunities, then strategize to plot a growth path for an organization and to use resources effectively and efficiently, becomes paramount.

There is a vast array of management tools available to meet such challenges, including tools for dealing with strategy analysis, decision making, and implementation. The challenge for managers is knowing which and when to use these tools. These have been discussed in previous chapters, so this chapter looks at rules to follow when your business is expanding.

Pre-expansion Rules

Once you have launched your business, you will quickly realize that to increase profits you will have to face the challenge of expanding your business. However, success to growing your business is dependent on first establishing a solid and profitable platform from which to launch growth strategies.

Entrepreneurs should take the opportunity to learn and gain skill and experience from all aspects of starting and running a business. Being involved in the daily operations will enable you to detect weaknesses as they arise and draft workable strategies to resolve such weaknesses. Understanding the basics and the very essence of what makes your business successful is critical for management to lead the business in future. Remember that in future you will be delegating tasks to newly employed managers. You will need to be able to describe what is required of them to make those divisions successful.

The Pilot Operation

There are some basic reasons why so many entrepreneurs ignore the importance of having a successful pilot operation in place before expanding. While the main factor stated by management is usually cost of running a pilot without income, the true factors tend to be overconfidence

The latter is self-explanatory. Not launching a product is a potential loss of sales and thus profits. The real problem is that managers are often overconfident in their abilities and their belief in their product. A possible reason for this is that many entrepreneurs have been successful in different or unrelated fields.

Another enemy is the dire panic to get to market first.

The Expanding Business

Taking your company to the next level takes planning and careful preparation. You will need more skilled staff, to whom you will need to delegate responsibility and authority. Where needed you will have to set up training to develop new and required skills for your expanded business.

Delegation of authority can be accomplished by adopting the following:

Financial motivation of key employees.

Creation of profit centers and share option schemes.

It is a normal for entrepreneurs of start-ups to find it difficult to delegate authority and as a consequence relinquish some control of their firms. This situation can be avoided, as there are ways to do so without giving up certain functions that you may want to keep control of. For instance, you can keep control of resource allocation and expense payments.

There are, in turn, two main ways that you can motivate key staff, namely, recognition for their work and commensurate reward for success. The most important recognition is to let staff know that they are in positions of authority as well as responsibility. Interestingly, this concept means that by delegating authority your managers’ mistakes will be limited to their spheres of responsibility.

Key managers are best motivated by cash incentive plans that are linked to their specific success and not that of a group. While you are trying to build a team, it is only such compensation that will see managers strive to succeed. The other side of the coin is when managers fail in their responsibilities. There are also some basic rules to handling such problems.

Handling Serious Issues

Start with identifying that there is in fact a problem.

Get the manager responsible to acknowledge that there is a problem. Get them to write a report to explain irregularities.

Immediately place the deal on hold. Even if the project is cancelled, you must cut costs immediately to safeguard positive cash flow and profitability.

As the CEO, take responsibility and initiative to explain to creditors that there is a problem and you will keep them informed.

Take action against managers responsible (if need be) and action to limit losses and exposure to market reaction.

Look for opportunities in such moments of adversity.

One method to limit the effects of a specific project loss is to diversify in numerous regions or types of businesses.

Rainmaker Observation: Before expanding your business, you should consult your lawyer and forensic auditor to develop benefits for your future employees. The goal is to expand, which comes with more employees and managers. Look at the implementation of share and profit incentive schemes which are then included in your forecasts and budgets.