The Growth Stage
Once your business is generating consistent cash flow, you have moved from the start-up phase to the growth phase.
The growth phase is one of the most critical to get right because it is here that your business transforms from an idea into a working company. During this stage, entrepreneurs have to wear many hats, including management, accounting, and sales. But you also have to learn how to delegate and manage employees, raise finance and market your business effectively.
Below we look at five problem areas you will have to overcome during this critical stage of business.
Common problems faced in the Growth Stage
1. Recruiting the Right Staff
Recruiting your first employee is a momentous moment in any business’s life but recruiting the wrong people can just as easily end up suppressing growth rather than supporting it.
So, you must take the time to hire the right employees from the start. Look for people with enthusiasm and passion first and foremost. Other important skills include ambition, excellent team playing skills, and good initiative.
Having a self-starter like this on your team will save you from having to manage them day-to-day, because during this key stage of business growth, you will have lots of other things to think about.
And do not forget, employing people means managing payroll. This means putting in place superannuation strategies and managing taxes under the PAYG scheme. We can help by putting your paperwork in order so that you get up and running with your payroll quickly.
2. Developing Management Skills
Employing people means you will also have to develop your leadership and management skills. This is something many entrepreneurs have difficulties with because they find it difficult to delegate.
But it is worth taking the time to develop this skillset because the success of your business from here on in will depend on your ability to manage employees effectively. Focus your energy on improving your leadership and communication skills.
3. Managing Cash Flow
By this stage, your business should be generating positive cash flow, but this brings its own set of problems. Cash needs to be managed effectively if your business is going to make it to the next stage of growth.
Have you ever heard people say, “my business failed because it grew too fast”? Well, there is no such thing as growing too fast. In most cases, these businesses failed because they failed to manage cash flow effectively.
Key points to focus on include:
- Keeping your books up to date and accurate;
- Putting debt collection policies in place for slow payers; and
- Building up your cash reserves.
We can help by providing cash flow management strategies tailored to your business needs.
4. Generating Capital to Fund Growth
It is unlikely that your business will be generating enough profit to adequately fund expansion during this early stage. This means you will have to generate new capital from outside sources.
There are several options available, including venture capital, angel investors, traditional bank loans, crowdfunding, and invoice financing, They all have their pros and cons, so you should carefully explore these options before making a final commitment.
5. Managing Debt
As your business grows, you will inevitably start generating debt in the form of bank loans, lines of credit, collected taxes and credit card balances. These debts need to be managed carefully if your business is to survive.
Ideally, debts should be treated as inventory on your balance sheet. You should also be aware of how much interest (if any) is being charged for each debt. Then, focus on paying down the highest interest incurring balances first.
The most significant challenge for businesses looking to expand rapidly is often accessing capital to invest in working capital (stock, new employees, training, work in progress or accounts receivable). Our team works with business owners to find capital whether through loans, investors, shareholders, or partners to allow the business to grow without running down cash flow.
For many businesses expansion by acquiring other businesses can be more profitable than organic growth. Expansion by acquisition allows a business to maximise the use of their systems & processes over a bigger customer base. In addition to the economies of scale of costs created by acquiring other businesses, the revenue of both businesses can be increased by both businesses intruding new services to each other’s businesses. Our team are experts at completing due diligence reviews to assess the viability of business identified as acquisition targets.
Our measure, monitor, and manage processes implemented in businesses assist in identifying growth strategies, assist in developing an action plan and the implementation and monitoring the outcomes of the growth strategies.
For businesses that have key persons in their organisations that head up the Financial (Bookkeepers/Accountants), Sales & Marketing (Division Manager), Operations (Division Manager) or General Manager. One of the AP directors attend management team meetings as an independent mentor/advisor to the Founders/owners of the business. The AP director provides advice and mentors the business owners and managers in relation to the key financial, operational and marketing strategies required to achieve exponential growth.
We can review your proposed or existing pricing structures/model and advise you on whether the pricing model will support the businesses growth objectives. Our team works with business owners to develop and or change existing pricing models to increase sales and review the potential for different pricing models for different sales channels i.e. pricing for online sales and shop front sales.
We will review your existing worker model to ensure it will not impede your growth objectives. Often business expansion is limited by the businesses capacity to access a skilled workforce to meet customer expectations. Our team will look at various agency, contractor, distributor, or mergers/acquisition to allow exponential growth. Business growth can be impacted significantly depending on whether the business relies on full-time employees, casual or part time employees, contractors, or business associates. At AP we can advise you on the tax, contractual, government incentives and financial implications of the different worker models.
As your business grows, we will review your current tax structures including the way transactions are structured and completed to ensure the business is gaining the maximum tax benefit and accessing all the government incentives available.
For start-ups we have experts in the R & D concessions and ESIC entitlements to ensure the business is structured correctly and all your record keeping is accurate and up to date to maximise any incentive claim.
We will identify the latest state & federal government incentives available to your business and industry.
As your business grows, we act as an independent sounding board for a business marketing strategy and plan and make recommendations about potential target markets, provide introductions to other businesses, and seek advice from our consultant marketing and branding consultants where the need arises. We are always pleased to review the financial budget for marketing to assess the benefit and ROI on marketing dollars spent.
Managing cash flow in a rapidly expanding business is critical. Most businesses have clear financial goals that identify the income to the business and the outgoings, generally for a period 12 months in advance. A financial budget will allow the business to confirm the capital and income needed to grow the business whilst maintaining positive cash flows. We can assist in preparing the business’ budget and identify the key numbers the business needs to focus on to achieve growth targets.
We are business tax specialists. Our team can keep you abreast of tax obligations for GST, Income Tax, Capital Gains Tax, Payroll Tax, Land Tax, etc., and support you to ensure you lodge tax forms and pay tax on time, so the business can focus on scaled & exponential growth.
As you can see, there is a lot to think about during this key stage of business growth. If not manages properly, it is easy for things to get out of hand.
So, it is advisable to develop systems to formalise workflows, This will make the day-to-day running of your business easier to manage.
You should also seek professional advice, especially for complex issues such as cash flow management, taxes, debt management, and finance.
At Accounting Professionals, we’re experienced in working with clients at all stages of the business life cycle.
Accounting Professionals have a team of business finance experts available to provide support when you need it. We will empower and support you to make the choices that are right for your business.
Get in touch with us today by completing that contact form here or call us: (02) 4297 0066.