For every company that isn’t growing, there is a unique story. However, there are three reasons out of which at least one recurs in every story.
I’ve considered the three reasons as the major reasons companies don’t grow.
And they are as follows:
1. A company’s inability to sell its products or services
Sales have a direct and significant impact on a company’s cash flow. In fact, there is little to no cash flow when there are few or no sales.
And without cash flow, it will be impossible to invest in growth areas like product improvement and creation, marketing, and scaling of operations.
Yes, money from other sources like the investors could be available for a company to use and fund growth, but it’s usually short-lived. It’s the money from sales that keeps a company sustainably growing. And to get that, a company should be able to sell its products or services, all else being equal.
When a company is unable to sell its products or services, it could be because the sales force does not know how to prospect for leads; could not find enough customers who value their product or service and are willing to pay for it; is not committed; the sales cycle is too long; or the sales efforts are unfocused.
2. A company’s inability to innovate
While a company’s inability to sell hinders growth significantly, the inability to innovate also has its own chunk share of drag on a company’s growth.
The business world in which every company is immersed is characterized by constant change. Customers’ needs evolve; economies change; government policies change; new social trends emerge and influence consumer behavior and product acceptance; and technologies keep advancing.
These changes usually create both opportunities and threats for companies.
Being open to new ideas, innovative companies capitalize on these opportunities to forge a new path of relevance and drive growth, and adapt accordingly to annul the impact of the threats.
Companies that are not innovative are not open to changes and new ideas. Hence, they are not only unable to capitalize on new market opportunities but are easy victims to threats from the macro environment. These outcomes hinder growth.
A company’s inability to innovate is mainly down to two things – the work environment is not open to new ideas and/or many of the employees are not able to think outside the square. While the former is the responsibility of the leaders, the latter rests directly on employees.
3. A company’s inability to retain their customers
The law of attrition states that however good your company’s product or service is, you will lose some of your customers every year.
This is of course, quite obvious: people relocate; their circumstances change; they are dissatisfied with product or service; they are not treated well.
However, when a company loses their customers at an average rate the same or higher than the average rate at which new ones come on board, it’s cause for concern.
And the first place to check should be the last two attrition reasons cited above – being dissatisfied with product or service, and not being treated well. These constitute the main reasons companies lose customers, according to several studies.
The truth is, if customers don’t get the results they pay for and/or are not treated well, it will be difficult to retain them.
And without retention, companies risk a constant churn cycle, where efforts and budgets are continually spent replacing lost customers rather than building a loyal and engaged customer base that leads to growth.
Inability to retain customers has kept a lot of companies stagnant. And the real danger of customer exit lies in its subtlety. Customers don’t usually leave in one fell swoop. Rather, they depart in hard-to-spot dribs and drabs.