Gearing Up for Growth
FastTrac, Kauffman Foundation
Nancy Rodriguez knew her research and development firm had more potential, but initially was not certain how to proceed. Based in Oak Park, Illinois, Food Marketing Support Services®(FMSS) develops new products for retailers and foodservice companies, and over the years the company has built an impressive list of clients including Quaker Oats, McCormick®, and Keebler®. Yet in 2003, a nagging question formed in the back of Rodriguez’s mind: Why wasn’t FMSS growing? “We had a great credit record and always paid bills promptly, but there didn’t seem to be money left over to invest in the company’s future,” Rodriguez explains.
In response, Rodriguez sequestered her management team in a hotel for two days to develop their mission and vision. They also conducted a SWOT (strengths, weaknesses, opportunities and threats) analysis.
Those exercises gave Rodriguez insights on how to approach new clients and expand business with existing ones. “Our industry is very competitive, so understanding our core competencies versus our capabilities helped me understand which companies would appreciate our expertise—and be willing to pay for it,” she explains. “That way, chasing new business doesn’t become a bidding war.” Rodriguez and her staff also recognized that FMSS’s selling cycle has lengthened in recent years, which makes it critical to target the right prospects.
Rodriguez has made a number of changes to achieve her growth goals, which include expanding annual revenue from $2 to $10 million and beefing up profits. New tactics include:
- Creating a strategic marketing campaign and corporate identity. In the past, FMSS relied on referrals to generate new business.
- Trademarking certain services to further distinguish FMSS from competitors.
- Educating staff about financials and holding monthly profitability meetings to review project bids against ongoing progress and final results.
Instrumental to these financial reviews is a new accounting system which FMSS installed in early 2004. This off-the-shelf program has enabled richer, more accurate information gathering that wasn’t possible under the company’s previous proprietary system.
“We had project-specific account information before, but not the level of detail we do now,” Rodriguez explains. “What’s more, our old program wasn’t responsive enough for me to compare past projects with new ones and build accurate profit margins into bids. That resulted in a false sense of costs, which was eroding our profit. For example, I thought our overhead was 20 percent, but the new system revealed it was actually 26 percent.”
Instead of strictly operating on intuition, Rodriguez is now able to make fact-based decisions as well. “I can see how much profit we’re going to make, which frees me to plan—instead of just react,” she explains.
By early 2005, Rodriguez was already seeing significant results: In the first quarter, the company’s net income was up 28 percent and overhead had been sliced by nearly 10 percent from the previous quarter. The improved financial scenario will enable Rodriguez to expand her staff and move the company to a larger building.
“A lot of this is about letting go and letting other people take over,” Rodriguez adds, explaining that only she and her business manager used to discuss the company’s financial performance. Today, by sharing growth objectives and assessing profitability with staff, there’s far more internal accountability. “It’s a huge relief,” Rodriguez says. “I feel like achieving our goals is a shared responsibility now.”
Planning to Grow
When Rodriguez decided to make some changes in her business, she worked with her management team to analyze the business situation before they determined how to address the key issues. Getting your team involved in the process typically results in a stronger strategy and a plan that everyone is committed to achieving.
The planning process is like putting a puzzle together. All of the pieces—product or service, marketing, management, operations, and financials—need to fit together so that your business will create the results you are seeking. You need to make sure all efforts are aligned with your vision and strategy because a decision in one area often has implications for other aspects of your business.
Too often, entrepreneurs spend the majority of their time figuring out their vision and goals without carefully thinking through the details of implementation. It’s critical that you anticipate the activities your business will need to stop, start, or continue doing. At the same time, you will have tough questions to answer. How will your business make this transition? What is the timeline? Who in your company will do what? How will you measure performance?
The decisions you make will help ensure that all aspects of your business are aligned and should drive your daily activities.
© 2006 Ewing Marion Kauffman Foundation. All rights reserved.