Many startup businesses have plans that are too ambitious and optimistic in outlook. However, reality sets in as some struggle to deliver on growth and performance as stated in their business plans.
What could be responsible for stunted growth and performance?
Capacity Over-Estimation
High Overhead Costs
Misaligned Remuneration
Negative Cashflow
To change the course of such businesses the following should be considered:
Capacity Rationalization: Reevaluate the business capacity. Oftentimes, business owners use design or assumed capacity in projecting revenue. Having run the business for 12 months or more, business owners should amend their business plans to reflect actual capacity.
Overhead Cost Reduction: Rework overhead costs to align with the new capacity. It might be necessary to flatten or straighten the organizational structure or to combine functions. Also, Identify those costs that are not key to running the business and cut down on them or eliminate them.
Remuneration Realignment: Reexamine the remuneration model to determine what best fits the new capacity. The key is to ensure that every kobo paid is tied to measurable productivity. *_As a golden rule: your labour cost should not exceed 15% of your sales turnover.*
Cash Flow Management: Reduce account receivables, negotiate better with vendors, expedite collection of cash or payment and reconsider the pricing model.