Small Business and Growth Plateaus

As a small business grows, some changes made necessary by growth are obvious while more subtle but, no less important ones often go unattended.

Take for example the need for additional office space, capital and additional personnel. Clearly these are obvious needs as a business grows from $100,000 in revenue to $1,000,000.  What about the infrastructure to support this growth?  These less glamorous but equally necessary business needs include things like a robust accounting system, payroll processing system, inventory management system, CRM software solution or cloud- based data storage system.  These items rarely make the cocktail conversation list of business owners but if a business leader ignores them, the employees will be telling them how bad they need them in meetings when they report operating problems they need help to resolve.  Employee feedback is probably the most glaring indication that the accounting system is not providing the information needs of decision makers.

So when and how do you, as a business owner, come to grips with these items and how do you resolve them? Take the accounting system as a case in point.  QuickBooks will get you started. If you succeed in growing, at some point you need a more robust system to supply the financial and operational information needs of the business and the business decision makers.

Let’s say you need detailed cost information to decide how to price sales of products when growth brings in new customers and the volume of sales to additional customers is higher than previous experience.  If you formerly sold 100 widgets per customer for $20 each and a new customer orders 1,000, can you lower the sales price per unit and still be profitable?  By how much can you lower it and still be profitable?  If your accounting system can’t easily provide the information your sales team needs to make this determination then you are face to face with a weakness in your accounting system brought about by growth.

When do you need to migrate to MAS 100,  NetSuite or Intacct? Moreover, when can you afford the migration?

Other dynamics are equally obscure to the inexperienced leader.  For example, do the skills you need in an employee population of 5 differ from the skills required when the employee roster grows to 100? Almost certainly they are but often leaders leave the change out of personnel and upgrade of skills until some tipping point in the business forces a focus on these issues.  Good leaders want to try to get ahead of the issue and avoid at least some of the frustrations of the workforce as the need for a transition emerges.

When you have five employees, it’s easy to personally convey company policy and procedures to each employee.  When the population is 100, you need an employee handbook to convey and reinforce those policies and to enable managers to handle employee situations and questions. Where do you go for help putting one together and what items should be included?

CFOs2GO has more than 30 years working with business owners on just such issues and shepherding them through the dynamics of change.

 


 

DLK LR

Doug Kennedy has extensive knowledge and hands-on experience in building robust foundations for family offices and serving the role of trusted advisor. He performs business advisory services and financial consulting work for a variety of  family-owned businesses from start-ups to mature successful enterprises. His experience has been spent in family dominated publicly owned companies, high net worth individuals, estate planning, wealth management, succession planning, leadership transition and risk management.

If you would like to speak with Doug, please use the comments section to make a request.

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