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Overcoming a Growth Plateau

Written by Michele / September 16, 2020

Marketing, growth, business, opportunity

To grasp the whole idea of “reasons behind growth plateau in business”, first we need to understand the literal meaning of growth plateau, which means to reach a state or level of little or no growth or decline, especially to stop increasing or progressing; remain at a stable level of achievement. 

 

Now in case of a business, it means that your business growth will start to taper off and eventually level out. Well, you can overcome the growth plateau phase of your business, if you’re confident enough about the reason that’s causing it. So that you can take needful steps to conquer that state.

 

Now to recognize the causes, you have to have a basic idea of “bottleneck”. According to the article of Kanbanize, a process bottleneck is a work stage that gets more work requests than it can process at its maximum throughput capacity. That causes an interruption to the flow of work and delays across the production process. In other words, even if this work stage operates at its maximum capacity, it still can’t process all of the work items quickly enough to push them to the next stages without causing a delay.

 

In an article by gravityflow, they said business bottleneck is broadly divided into 2 types:

 

1.Short-term bottlenecks – These are caused by temporary problems. A good example is when key team members become ill or go on vacation. No one else is qualified to take over their projects, which causes a backlog in their work until they return.

 

2.Long-term bottlenecks – These occur more often. An example would be when a company’s month-end reporting process is delayed every month because one person has to complete a series of time-consuming tasks. And both these types can cause growth plateau in business. However, our Rock mission’s Michele Cuccovillo has explained about the causes in a more detailed way –

  1. Strong Financial Bottleneck– it means a hold-up in some part of a PRODUCTION LINE which disrupts the smooth flow of work. So in this case, suppose a particular business wants to grow but as they continue, the cash in the bank account lessens. This shows that the business has a negative working capital. So to be able to increase trading, we need to put a lot more funds into that business. But if you keep on pushing your vocation to grow without putting extra ready money, gradually that is going to shear your business financially.

 

Fix: be careful about how much growth you can manage to have.

  1. Operational/ Production Bottleneck – In this case,  limited capacity reduces the capacity of the whole chain of production in a business which can result in stalls in production, supply overstock, pressure from customers, and low employee morale. so, let’s assume you need to resell a common physical product like a mug. now you make a business plan and you see that you can only sell a hundred mugs/day depending on your rate of production. But suddenly you decide to sell more. In that case, you’ll face the production bottleneck. some call it “accumulation”. Wikipedia has explained it in detail, telling that – Accumulation

 

When input comes in faster than the speed of the process, accumulation starts to occur. This means that the machine either does not have enough capacity, is not being fully utilized (inefficient in use), or has an under-qualified operator.

 

Fix: instead of just focusing on selling, focus on production rate as well, and let both linearly increase.

iii.Sales Bottleneck – it is part of the selling process that limits production. this reason is one of the familiar ones. this occurs when the amount of project/ sales you’re trying to get is taking a huge amount of time. Hoffeld group explained in a very understandable way in their article, about insights of sales bottleneck.

example- the sign-up time of a contract might take for a prolonged duration or maybe the lead that comes to the website will take months and months before the person registers himself/herself as a customer. On paper, a big order from a huge client looks very appealing. But, it can take a whole lot of energy and resources to attract, win and keep those infrequent opportunities — and they could even put your entire company at risk.

 

Fix: the number of sales or the amount of project should be taken in a controlled manner, understanding the quality we want to deliver and the capacity of our business regarding the duration it takes for each project/work. There are some other reasons as well that could be linked to the sales bottleneck, but we’ll go through them at a later stage. Try keeping the conversion rate high.

Remember, as captain Ahab learned in Moby Dick, Pursuing the biggest whale can even drag you under

  1. Lack of Product-Market Fit– according to an article by SaaS resources, product-market fit is very much important in any business because until that point you don’t know whether or not what you are building solves a real problem that a large enough market has. Without clarity on this, you could continue investing in building something that is not commercially viable.

so what happens when your business is lacking product-market fit?

one study proved 42% start-ups fail due to a lack of product-market fit. in this case, business owners think that problem is “the cost of acquisition” -it’s a huge myth. most of the time it’s just the fact that – the business is losing more customers at a rate that is far higher compared to the speed at which the business is acquiring customers. in this process, the owner gradually forgets how important the customer base is. Therefore, the business either slows down in growth or doesn’t grow at all. This is quite a common problem as typically, you start a company and you build up a marketing function where the main agenda is to gain new clients- very less focus is given on retaining the existing customer. and gradually it creates a growth plateau.

 

Fix: By the time you’ll realize that your business plan should now focus more on keeping the customer base exact –  it always suffers some or more growth plateau. so to avoid that- from the start, you must create a solid plan focusing on existing customers and how to retain them. find the solution before the problem comes. thinkgrowth.org has explained in an article multiple ways to prevent a lack of product-market fit.

  1. Long Sales Cycle around the Wrong Pricing–  this mostly happens in the Start-ups, where people tend to over-promise and then under-deliver most of the time- which increases unsatisfied customers. One example is – If you desperately price-drop to attract sales, it’s a very shaky, short-term approach that we call a race to the bottom, where you attract the lowest-value clients that will leave as soon as someone undercuts you. How long and shorter the sales cycle can effect business is nicely explained in an article by Neil Kokemuller.

 

Fix: in the Long sales cycle, your rapport and eventual relationship with the prospect should become strong. Building rapport is important to long-term customer relationships, which should serve as the goal of most salespeople in the early 21st century. You have time to get to know the prospect when you have multiple meetings and significant time invested. A better strategy than putting wrong prices is instead to add value to what you do. This will make your business more profitable and allow you to compete for better, more profitable clients or customers.

In the end, remember growth plateau depends a lot on the bottleneck. as Eliyahu M. Goldratt once said “I say an hour lost at a bottleneck is an hour out of the entire system. I say an hour saved at a non-bottleneck is worthless. bottlenecks govern both throughput and inventory”. Preventing your business from getting growth plateau, can help your business grow beyond its limits.

 

As we say, Growth is never by mere chance. it’s the result of forces working together.