This article was originally created for Hayes Knight (now Nexia Auckland).
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In truth, businesses require step changes throughout their lifetime. Whether it is a move to a bigger warehouse, expanding the sales team or changing your accounting package; business owners have to maintain a tricky balance between over-stretched resources and superfluous capacity.
As a business owner, you want to achieve sustainable business growth – growth at a rate that doesn’t disrupt or fracture your core business. Based on a body of research around the most common growing pains faced by businesses worldwide, here are our top tips to help you through those step changes and necessary growing pains.
Not only does a well written business plan give you strategic direction, it provides the starting point for setting your businesses key performance indicators (KPI’s) and a framework for ongoing reporting. Your decision making is enhanced by having a focused direction for your business, which will help you manage growth pains.
Preparation of an integrated forecast (i.e. profit and loss, cash flow and balance sheet) will give you the financial plan for the coming year. Not only does it provide you with the ability to measure your actual results, it helps identify any potential shortfall in cash flow which will assist with investment decisions that you face.
A growing business requires more working capital to keep pace with the growth. To explain by way of an example – let’s say last year the average debtors were $50,000 per month and inventory $25,000. With the recent growth in the business debtors are now $80,000 and stock $40,000. Your working capital requirement has increased by $45,000 – this must be found either via terms from your suppliers, a cash injection from you or extra facilities by your bank.
While not necessarily the fun part of business, it is an important aspect to keep the business moving in the right direction. By having the right HR procedures, health and safety procedures, office administration procedures etc. in place, you provide your team with ‘go to’ resources. As long as they are documented and updated, they will produce efficiencies and minimise your risks. Often, it’s the person in charge of the office admin, bookkeeping and filing that has the most knowledge of how the office runs. They can be your key person for day-to-day sanity.
There are many great IT solutions for business use available today. As a business owner, it’s smart to challenge the way you do things to find more streamlined and efficient business tools. That way, you can alleviate mundane but necessary business tasks, which allows the team to focus on tasks that help grow the business.
As your business grows, chances are you need more staff. This is a perfect opportunity to review your current skill set in your team and to actively recruit for the skills that you require. You may think you need “another Joe” but actually you require someone who can provide analysis and support to allow your current ‘Joes’ to focus on the sales that will give you the best results.
As a business grows meetings become important to ensure communication and co-ordination amongst the team. If you or your team feel meetings are a waste of time – it’s a sign your meetings are not well planned and run. Removing or reducing meetings can create uncertainty within your team. Improving the quality of your meetings is the answer.
An increase in turnover on its own does not mean the business is going well. In some instances, a company may find that its sales continue to improve while gross profits remain flat. All that company has achieved is an increase on workload. Consider your customer segments, sales channels and product mix to ensure your growth is beneficial to your business. Focus your sales team on how they can ‘add fries’ to each order rather than cold calling for new customers.
Growing pains are evident in businesses of all sizes. They are a warning signal to management of impending difficulties. In some cases, they signal potential failure. That’s why it’s important to recognise them and address them in a timely manner. Your accountant can be a real asset in helping you work through the numbers and plan ahead. If you need support, now is a great time to get in touch with a Hayes Knight advisor.