Monday, September 30, 2013

“Growth in Middle-Market Companies.”

All small and middle-market businesses strive to identify avenues for growth, but the best path is often far from clear. Here are four guidelines:

1. Find opportunities to increase quantity without incurring additional fixed costs. 
Large investments—for instance, in enhanced production capacity or cutting-edge technology—can hold significant risk for middle-market companies.

2. Verify that sufficient demand exists before investing in fixed costs. 
Before making strategic decisions about products or services, executives must first confirm that a customer base exists.

3. Ensure that growth is built on superior resources and capabilities.
Many companies approach growth with an attitude of, “How could we sell the same product we’re selling to more people?” or “What’s the next adjacent product to our flagship offerings?” These strategies can deliver value but may be somewhat limiting. Middle-market companies should also think hard about opportunities to identify new applications for their core knowledge, skills, or processes

4. Recognize the areas of the business that are not scalable.
Sometimes when companies grow, they lose the distinctive characteristics―such as efficiency or a unified vision―that made them successful in the first place. If a business’s success is based on its deep knowledge of local markets, for example, expansion into new geographies would effectively put it on even footing with the competition. Similarly, growth can often create additional layers within an organization—rigid infrastructure or an authority hierarchy—that effectively impede innovation and responsiveness to changing market conditions.

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