Posted in practice
on February 7, 2015 6:54 pm EST
How Will Your Business Grow This Year?
Growth is good, right? Opinions differ on that. Many environmentalists argue that we must find a way out of the "growth trap." But if you ask, "Is growth good for me?" the answer is likely, "Yes."
History reliably informs us that, in business as in Nature, the alternative to growth is failure: stability is not an option. It may be that this is because it’s impossible to find a stable balance point using the “growth is (the only) good” assumption as your fulcrum. But arguing that point is likely to convince you of nothing except my own lunacy. So let’s focus on some of the ways you could make this year a good one—by growing your business.
There's good news on the horizon: 2015 could be a very good year for church design firms. The U.S. economy is growing at a healthy rate (the rest of the world, not so much).
2015 could be a very good year for church design firms. The U.S. economy is growing at a healthy rate (the rest of the world, not so much). Inflation, unemployment and interest rates are all low (this economic trifecta won’t last, but let’s enjoy and profit from it while we can). Forecasters predict some expansion in the religious construction market, or at least an end to the contractions of the last seven years.
There’s business out there waiting. How are you going to find it, do it, and grow in the process? Your own answers will depend on how you see your own firm, so let me offer some conceptual frameworks for your consideration. You may grow by just going out there every day and working harder, but it may be both easier and more effective to work a little smarter.
In financial terms, growth means increasing your free cash flow (FCF, or the bottom line on your profit and loss statement) and your asset base (your balance sheet). (visit link
) defines FCF as “operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base.”
The size of your asset base is maintained and hopefully enhanced by your free cash flow, and an asset base of any size will comfortably support a certain volume of cash flow. Too little cash flowing through the system means unpaid bills, unhappy vendors and creditors, perhaps even forced sales of assets. Too much cash flow translates into overtime and under-planning, which can all too easily translate into mistakes, unhappy clients, even legal action in the extreme case.The best laid business plans …
Balancing the desire for increased cash flow with an understanding of how the asset base (space, equipment, people) is going to support it may be the best reason to do a business plan. No one has ever seen a business plan actualized on anything but the most macro level. Everyone gets the detailed predictions of how things will work wrong. But a business plan will give you a sense of how much cash flow your asset base needs, how much growth it will support, and where the strong points and weak spots can be found.
Most of the business plans and plan outlines I’ve seen take a dive from the platform of the executive summary deep into the details of monthly forecasting and cash flow projections. For your 2015 growth plan, allow me to suggest an intermediate level of analysis. The overall aim is larger free cash flow. Cash flow is driven by three main activities: creating value for clients, communicating value to clients and capturing value from clients.
Start with a fresh look at how you create value. What does your business do? Take a step back from the day-to-day task list and think about what you’re really getting paid for now, what you might be getting paid more for in the future. How can you create more value, different kinds of value, perhaps even unique value, using your current asset base? It may be that everything and everyone in your firm is operating at maximum capacity in an optimum environment and with perfectly synergistic interactions. But couldn’t it also be the case that if you take that step back and look carefully, you’ll find some things that could be tweaked? Maybe some things that could be radically re-thought? Maybe some things that are just habits from the past, that no one really knows why you’re doing? If you do more of everything you’re already doing, you might create more value. But you might create much more value by doing some different things, and doing some things differently.