Going for growth…
In my previous blog in this series, I explained the 4 different stages a business will go through in its life
- End game
I explored the start up stage, broadly from 0-5 years of a business commencing and gave some do’s and don’ts if your business is at this stage. The nature of the advice does changes depending on what stage a business is at and in this blog, I will examine the growth stage – what are the pitfalls and what are the opportunities?
Okay, your business has survived the tricky first 5 years and you, the business owner are feeling like putting your pedal to the metal and accelerating into the distance in a blaze of profit… (Apologies for the motoring metaphors, I have just been looking at cars I can’t afford on Autotrader…)
What are the Dos and Don’ts?
- Don’t over-trade; think about the profit you make – the old adage ‘Turnover is vanity, Profit is sanity, Cash is Reality…’
- Don’t neglect the cash position; greater activity can result in higher stock or debtors – not necessarily cash – cash is still king! More businesses fail through lack of cash than lack of profit…
- Be careful about employing staff, you might be at the stage where you are thinking of employing someone… Employees will not be as motivated as you! Be clear as to the benefits they will bring, perhaps put them on a short term contract and evaluate at the end of 3/6/12 months
- Don’t spread yourself too thin in your growth plans, focus on what you as a business does best and what can make the best margin
- Take advantage of trading history and accounts to get finance and at better rates
- Use leverage from the network you have built up to generate leads for you or goods/services at better rates
- Undertake a growth plan about where the business should be in 1 year/3 years/5 years/10 years and keep yourself accountable to it. Possibly work with your accountant or a business coach to monitor your process and keep you accountable
- Ask your accountant about government help for growing businesses e.g. (the unfortunately defunct) Growth Accelerator
- Consider the purchase of new premises and assets and ask your accountant as to the best way of acquiring them
In this stage, you will be growing your business beyond what you might call a ‘lifestyle’ business. You need to be careful about your expansion plans so that although turnover increases you don’t just increase your cost base by the same amount. You will become a busy fool!
The other main point to note is that in your quest for expansion, you don’t run out of cash. Manage your growth carefully!
Some final tips:
- Maintain a good standard of book-keeping to allow you to print off the reports you need and so you can easily review your KPIs
- Undertake regular cash-flow forecasts to identify ‘pinch points’
- Discuss with your bank about the need for adequate levels of finance whether overdraft or longer term finance
- Write a business plan – even if it is to yourself. This will give you greater clarity about the future of your business
- The final tip has to be to keep in contact with your accountant – you need external advice and these days it isn’t necessarily forthcoming from the banks!
Until next time…
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