How large do you want your company to be within five years? Why?
When you hire an architect to design a new headquarters building, the first question he asks is how many square feet you want. If you tell him that it all depends on how well the new products go, what the market does and what your competitors do, he’ll repeat the same question: “How many square feet do you want?” Once the building size is specified, the architect can move on to other design-related questions. Similarly, a company strategy must start with a sense of size. Size frames all the other elements of your strategy.
While revenue and profit are the most common measures of size, they are not the best metrics for all businesses. For many companies the key measures may be the number of contracts, employees, or customers.
Asking yourself what size you want your company to be in the future is not about fantasizing or wishing. Nor is it about forecasting or projecting. It’s about visualizing a company size that supports the answers to the following questions.
What size will you need to be, in order to continue to compete? As in a poker
game, the ante required for staying in the game increases over time. You need to be large enough to sustain the level of resources required to meet the customer’s growing expectations of the quality and scope of your products or services.
What size do you need to be to obtain the resources you need to sustain the
business? What will it take to attract the talent, capital, and partners you need to succeed?
What will your team require to remain engaged in the future? Company growth
creates opportunities for career growth. Key players will require greater compensation to support their lifestyles (children, school tuitions, bigger homes, travel, etc.). Key players also expect opportunities for personal and professional growth, so they can master new skills and increase their own personal market value.
What growth in ROI will it take to keep the owner’s capital in the business?
What size will you need to be to remain important to your vendors? In order
to get priority when there are shortages? To have orders large enough to get the favorable pricing required to remain competitive?
What size do you need to be to fully utilize your assets? Return on Assets
(ROA) is low when utilization of machines, people, and your intellectual property is low. What size do you need to be in order to have enough experience to drive your unit costs down through the learning curve?
What size do you need to be to support the owner’s ultimate exit strategy?
What size do you need to be to minimize risk? Depending on one customer
purchasing one product makes you very vulnerable. What size do you need to be to support a “safe” diversity of customers and products?
What size do you need to be to keep a competitor from preempting you in the
market? One big-company strategy is to identify products that are successful and swoop in and “steal” them. Big companies like to reverse-engineer a small company’s winning product and then use their own well-oiled distribution system to roll it out nationally or internationally.
What size do you need to be to take out your competition? You can do this
either by acquiring your competitor’s customers or acquiring your competitors directly.
What size do you need to be to manage government and customer certifications? It takes resources and time to obtain and sustain certifications from ISO, TSO, FDA, OSHA, EPA, mil-spec and the like.
What size do you need to be to satisfy your vision and ego? What size do you
have to be to make the kind on market impact you desire?
Everyone in a company has a future size in mind as they prioritize their daily actions. Lacking any formal planning, everyone’s number is different. Developing your strategy starts with getting everyone’s number on the table, sorting through their reasons for that number, and agreeing to a common number that will harmonize everyone’s daily actions.
Having a common visualization of the future everyone is working toward is key. Agreement on the future size the company is working toward creates a framework for answering the next set of strategy questions. (These strategy questions will be the focus of future blog posts.)
Creating a strategy that captures a visualization of the future everyone is working toward is a key element of strategic planning. If you’re interested in having a facilitated strategic planning meeting that moves you from concept to tangible implementation, check out our service offerings online, contact us, by email or better yet, give us a call at (800) 207-8192 to arrange for a complementary consultation to determine if you are ready for strategic planning and if our program is right for you.