When a business is started without all the necessary precautions and plans put in place to ensure growth, the business is doomed to fail or become stagnant without any increase in its profit margin.
Option A :
Investment >Profit = Failing Business (deficit)
Option B :
Investment = Profit= Stagnant Business
Option C :
Causes of Stagnant Business
Some causes hindering the growth of a business are usually tracked as per the business aspects such as operations, sales or marketing.
Operations: A stagnant business could be caused as a result of operational issues; hence fixing these issues can put the business back on the rails. From an ops viewpoint one has to ask a couple of questions why the business isn’t growing with current resources:
- What is the duration for service/product provision to a client?
- What is the maximum number of services/products that can be provided over a predefined period of time?
- Is this level attained? If not how much more can be added to production before reaching max capacity?
- What is the extra expense (cost) needed to achieve these?
- How much time is needed to achieve these?
Sales: After diagnostics, if stagnant growth isn’t because of operations, then it could either be because of sales or marketing. In order to determine if the cause of your stagnant growth is because of the sales of the product or service then investigate to see if sales goals are being met. Track sales numbers, max capacity, available resources for sales department or team, and establish whether the stagnation is because of sales.
Marketing:. If there is no issue with operations nor sales then the most likely cause could be marketing. Marketing and sales both aim at augmenting profitability. It is difficult to differentiate between these two concepts. Marketing brings together buyers and sellers via methodical planning, implementation and control of business activities whereas sales is a transaction between two parties where the buyer receives goods and services in exchange of a legal tender (money). Stagnant growth could be cause as a result of inadequate or inappropriate or insufficient marketing strategies, plans, and implementation techniques.
Getting Stagnant Businesses (Growth) on the Move Again
There are many reasons to why a business is stagnant and no longer growing. Most often the business owners are faced with this kind of dilemma at one point or another in the life cycle of a business. Sometimes the business owner doesn’t know how to react to this or how to keep the business moving again. To get stagnant businesses on the move again, the reasons for this “no growth” level must first be identified and secondly develop the right solution to this predicament.
1. Information gathering, sharing and implementation
- For a business to grow it needs funds, and profits is what makes a self-sustaining business to continue to flourish.
- Lack of reinvestment into the business will slow its grow rate drastically i.e. inability to hire or outsource tasks, launch new products or open new locations, publicise adverts etc.
- Evaluate how much funds is required for reinvestment (capital needed to support growth of the business)
- Generate realistic financial plan and budget (incorporating income, expenses, cash flow etc.) to fund growth
- Raise funds (loans, salary, private accounts, mortgages) for the fostering of the business growth plan
4. Proper planning prevents poor performance
- Understanding why a business is stagnant is crucial for its growth
- Develop achievable strategic goals over a predefined period of time
- A good tool to use to analyse a business is the SWOT analysis (strengths, weaknesses, opportunities, and threats)
- Having a broader and wider picture of where the business is and the direction it has to head in, develop a plan that will put the business moving again.
5. Personnel or staff training
- Employees go a great way to determine the growth path of a business
- Employees should be provided with the necessary job specific tools and training to make them professional
- Training personnel in specific skills is beneficial to the organisation or business
- Establish a smooth chain of communication between business owner and employees
- Upon evaluation and analyses of employee performance, elaborate and implement employee training programs that reinforce staff and enhance performance.
There is a saying that helps in the optimisation of businesses and should be implemented by business owners that want to have a successful business; “employees should be trained so there can leave and be successful anywhere else and should be treated in a way that they want to stay”.