Preparing for business growth
When businesses face a high growth phase it is very important you take the time to analyse whether you are ready to handle an increased demand from different perspectives. Understanding when your business is ready for the growth period can be complicated, but there are a few steps that can help you during this turbulent stage of your business.
A failure to get the basics right during the growth phase of a business can quickly mean that the business will be over. Without allowing for rapid, sustainable growth, a business can end up running out of money and failing to secure the resources it needs to create that growth.
Even if you didn't plan to grow your business, it's never too late to start and the first step is to evaluate where you are, where you want to go, whether you have the resources available to achieve it and how you are going to do it.
1. Evaluate where you are now
- Business Structure: How you choose to structure your business is an important consideration at all stages but even more so as you grow. It is essential to consider why you are changing the structure and your objectives. Do you need a structure that will allow you to expand overseas? Or are you considering a structure that protects your personal assets?
- Profitability: Having a clear understanding of your cash flow, of what makes the business profitable and where it sits against competitors is also vital when establishing if it's ready for growth.
- Process and systems: You have to evaluate your current processes and systems to determine if they are adequate and prepared for growth.
- Risks and Weaknesses: Consider the business risks that could stunt future growth and how you would mitigate them.
- Are you ready to grow: You have to make your business grow at a pace that you can physically, mentally and financially manage. One thing to consider when deciding whether you are ready to grow are the skills needed to achieve growth. You should have solid financial, marketing, sales, communication, technical, and administrative knowledge. If you haven't, you either have to learn these skills or delegate them.
2. Set up Goals
Start thinking about different types of goals you wish to achieve and break them up into three distinct areas: Personal goals, business goals and family goals.
By setting actionable goals that move you forward, you move toward your goals and are always in control instead of being reactive to circumstances. It's necessary to be decisive and make things happen the way you want them to. For example, what plant and equipment are you going to need? How many staff? What growth in sales are you looking for, and where will you be operating from, and so on? So, as the first step, hold a planning day with your key team members and your accountant and draft a plan for the future.
It is important to evaluate if your current team is ready and willing to grow with you. You will need to give your staff all the tools it needs to stay productive and efficient in the face of a potentially increased workload.
In the case that you need to hire employees to fulfill new tasks, are you ready to take on the responsibility of hiring and training employees? Do you have enough cash flow to ensure wages and other obligations are paid on time?
You will also need to consider if you need to increase the size of your premises, source new suppliers, implement new IT systems and your equipment needs.
4. Plan how to finance your growth
Make sure you have done extensive analysis of your company's performance and thought about all of the costs associated with business growth. You then want to investigate all the possible avenues of capital available to you, whether they be credit card, bank loan, a line of credit from a private lender or some combination.
Consider cash-flow strategies that bridge the gap between when expenses must be paid and when money from clients and customers is received.
5. Keep up with reporting, KPIs and forecasting
Once you have a viable growth plan in place with the funds to accompany it, review your financial figures and projections each month. If you borrowed money, it's even more important to see if the investment is reaping the expected returns.
The best place to consider those reports is at formal monthly/quarterly management meetings attended by all key team members and your accountant.
Remember to regularly monitor your progress in order to readily identify concerns and remedy the situation.
The best method of reviewing your progress is to compare actual results to projections. Study each area of your analysis to determine why the figures vary, and then decide how to resolve any problems.
If you are unsure of anything, get us involved and we will assist you in every step of the way.
If you have any questions about any of these opportunities, please contact your Goodwin Chivas & Co. representative.