By Phil Chichoni
Zimbabwe is trending negatively from an economic point of view. Growth
forecasts have been reviewed downwards again from original double digit
forecasts at dollarization in 2009, to the current World Bank estimates of 2
percent in 2014. Liquidity remains tight as financial institutions have reduced
new lending as they try to manage their high exposures to non-performing
According to National Foods chairman, Todd Moyo, businesses have
endeavoured to change their operating models in response to slow demand
across most sectors of the economy. This has seen numerous instances of both
backward and forward integration whereby wholesalers introduce retail
offerings; retailers now offer wholesale services and numerous sellers of basic
commodities are investing in manufacturing assets in an effort to take a greater share of the value chain.
(Examples: OK Mart & TM Mega Market are retailers who are now offering
wholesale services, Mohamed Mussa is wholesaler offering retail; and
Probrands a basic commodity distributor now into manufacturing).
Why must a business grow?
No new business is ever started at 100 percent of its potential. The regular scenario is that a business starts at a small scale then grows gradually until the optimum level is reached.
However, as the economy is dynamic, with inflation, increasing competition, shrinking niches and rising costs, that optimum level is continuously rising. The business has to keep up by growing. Because every business is an investment, it needs to generate excess profits for the benefit of the investors or owners. Without growth, the returns from the investment will not be maximized.
Like a living thing, once a business stops growing, it starts to die. Capital has to be replaced to make up for depreciating assets as well as to fund research and
The need for growth is illustrated by the story of an entrepreneur I know who owned a fleet of buses. When the buses were new, profits were good. As the months went by and the buses started incurring increasing repairs and maintenance costs, profits started declining. Unfortunately this entrepreneur
never thought to put money aside for replacement of the aging buses.
As the years went by, one by one the buses started being scrapped. Eventually all seven were down and that was the end of this entrepreneur’s business.
Without growth, a business is declining and will eventually die.
Methods of growth
Small businesses can expand their operations by pursuing any number of avenues. The most commonplace methods by which small companies increase their business are incremental in character, i.e., increasing product volume or services rendered without making wholesale changes to facilities or other operational components. But usually, after some period of time, businesses
that have the capacity and desire to grow will find that other options
should be studied.
Common routes of small business expansion include:
· Growth through acquisition of another existing business (almost always smaller in size)
· Offering franchise ownership to other entrepreneurs
· Licensing of intellectual property to third parties
· Establishment of business agreements with distributorships and/or dealerships
· Pursuing new marketing routes (such as catalogs)
· Joining industry cooperatives to achieve savings in certain common areas of operation, such as marketing and advertising
Growth strategies for a tough economy
Almost every chairman’s report by public companies that reported in the past few weeks for the period ending June this year began with reference to the tough state of the economy. Some of the companies had already put in place
survival strategies and are reporting some profits, while someare now seeing the need to restrategize after suffering losses.
Most of the profitable big companies benefitted from the vast skills and experiences of their directors and business advisors and are on course for growth.
However, many small and midsize companies do not have easy access to such wisdom, but they still need to survive amid the economic chaos, let alone grow. I have compiled some words of wisdom gleaned from various business experts and successful entrepreneurs on how you can grow your business in the midst of the economic slowdown.
· Diversify your customer base. If you are too dependent on one or two customers for the bulk of your sales, you are putting your business at risk if they run into financial difficulties. This is a lesson that too many entrepreneurs are now learning the hard way.
· Don’t neglect your best customers. While it’s important to ensure you have the right mix of customers, it’s also wise to treat your best customers with extra attention. By nurturing relationships with key customers and building their loyalty, entrepreneurs can grow along with them. “It’s easy to make the mistake of being distracted by the most persistent or annoying customers,” notes one business owner. “Your biggest customers are unlikely to be the
· Take a proactive approach to marketing. No product or service sells itself, especially not in a slow economy. Word-of mouth marketing is not sufficient to grow a business. You need to define and promote your unique selling points. You should have a well-defined marketing strategy that includes
response or inbound marketing via the Internet – to pull in customers – combined with awareness creation techniques such as direct marketing – to push your business to potential customers.
· Step back from the day-to-day to focus on strategic goals. While it can be easy to get lost in daily details and neglect your strategic plan, the consequences can lead to failure. It’s essential to keep your mission and values in mind as day-to-day operating decisions are made. Know what
your strengths are, what you want to achieve and how you plan to get there. Keep your business plan documented, updated and shared.
· Foster a positive attitude in your staff. Everyone within the organization needs to be trained and coached to understand the company’s strategy and to
proactively promote the business at every opportunity. When hiring, look for people with the right qualifications, but also the right attitude. “If you can’t change people’s attitudes, you may have to change the people,” says a business expert.
· Consistently monitor assets as well as profits. Most entrepreneurs are very focused on managing the bottom line by monitoring sales, gross margin
and expenses, but they often ignore asset management, especially cash flow. For a better bottom line, keep an eye on asset and cash flow management to build net worth. Balance short-term and long-term needs with short and long-term sources of funds. “If you foresee problems on the horizon, now is the time to talk to your bankers. Never surprise them with bad news,” advises a finance expert.
· Balance the entrepreneurial approach with sound analysis. Maintain the enthusiasm and spontaneity to react quickly, but do your homework and base decisions on facts, not just feelings. “Entrepreneurs can make the mistake of neglecting or ignoring market feedback and analysis of the facts. Don’t stick with what works until it stops working. Be aware of the warning signs. Evolve and grow by optimizing systems and installing best practices and latest technologies,” advises a business executive.