Part VII: Managing Growth

Chapter 28
Managing Growth

IN This Chapter
To grow or not to grow?
Growth strategies
Planning for growth
Problems and solutions
Tools for growth

The biggest challenge confronting you as an entrepreneur is to choose the right time and the right way to grow. This might involve finding additional financing to expand your product offerings, increasing your production capability, extending your geographic reach, tapping into foreign markets, or “servicizing” a existing product.
If you decide to grow, bear in mind that this can make managing your business more complicated and time-consuming. Also, you may have to give up a certain amount of day-to-day control.
Growth will affect your customers, too. If your business is known for personal, attentive service, think about whether growth will change that image. Don’t get so caught up in looking for new customers that you forget the ones you already have.
Whether growth is planned or unplanned, steady or erratic, never lose sight of who your customers are and what they want.
To Grow or Not to Grow?
Suppose your business is thriving and profitable, and your employees are happy and productive. Why would you change anything, let alone face higher risk and increased debt by trying to grow?
Businesses may choose to pursue growth for many different reasons:
Increasing profits
Taking on new challenges
Achieving economies of scale
Getting volume discounts on inputs
Enhancing the company’s status
Acquiring a wider or more diverse customer base
Targeting new customer segments
New technologies offer entry to new markets
The benefits of growth aren’t limited to your market presence or bottom line. Well-managed growth can mean exhilarating and fulfilling times for your entire team.
Growth Means Profits
When we talk about growth in this book, we are referring primarily to profit growth. Although sales volume, market share and employee growth can all be indicators of success, a truly thriving business is one in which profit is maximized. This is particularly true for smaller entrepreneurial companies.
While no strategy automatically produces a high-growth company, the following considerations are of prime importance:
Profit growth is the most important metric. All others types of growth (volume, market share, size of the company) increase costs.
Policies should allocate assets to maximize profit. Allocating money to the wrong company objectives is a sure way to slow growth.
Company and product branding are critical to profits, as they are difficult for competitors to overcome. Products that don’t fit your brand, and maintain or increase your competitiveness, should be cut back or discontinued.
Customer knowledge and management is the most important focus in a growth company. All other issues should be subordinated to customer sensitivity.
Cost controls are important, but you can’t save your way to growth.
Growth strategies begin and end with the company’s leader. Your personal commitment and vocal leadership are essential and can’t be delegated.
The Risks of Growth
Growth should never be an end in itself. It’s a little like speed when you’re driving a car. The goal is not to drive at the fastest speed possible, but to find the right speed for your schedule, skill level, vehicle, speed limit and road conditions. When you refuse to be constrained by these factors, speed can become destructive rather than constructive.
In fact, unmanaged growth can be one of the most dangerous forces a business will face. It often requires massive adaptations that destroy existing policies and procedures, leaving managers scrambling to keep up with new demands and new realities. It can lift a business onto a new playing field that’s far from level, causing it to have to compete suddenly with well-established, better-capitalized firms.
Growth can bend accounting, inventory and quality control systems to the breaking point; render warehouses and facilities obsolete; and stress relationships between your team members. It can also subject you to new regulations, new tax burdens and new scrutiny from media and consumers.
Perhaps most seriously, growth can cause your business to lose sight of what makes it special or valuable to customers. In pursuing new customers, a growing business may neglect existing customers and end up by failing to serve both. Your goal should be to grow only as much as will allow you to serve your customers effectively and profitably.
…
When the call came, I wasn’t ready for it. I’d been telling myself I wanted to work for a big multimedia firm. In fact, that was a big part of the reason I worked so hard on my science animations, even when it seemed like there was no real interest. I thought of it as building my portfolio and getting my name out there. A couple of colleagues of mine had been snapped up by expanding firms, and I figured it could happen to me, too.
Then it did. And I wasn’t sure how I felt.
Joe MacGuire is a digital animator who specializes in teaching science concepts to children through animated shorts. It started as a hobby, but as time went on, he’d been able to monetize his films. He’d even been hired to create animated infographics for media companies and nonprofit foundations.
Last year, Joe got a job offer from Somniana Productions, a fast-growing digital production company based in Los Angeles. They were expanding operations and wanted to grow their office in Joe’s hometown of Chicago, Illinois.
Somniana Productions’s core business was recording and editing video and sound pieces for other firm. Now, they were developing their own online multimedia series, which they would market under their name. They were impressed by the series of short, highly popular animated films Joe had posted on YouTube, and they wanted him to head their new children’s media department. It would mean managing new projects and helping with Somniana’s transition into producing original material. They offered him a high salary and invited him to hire his own team.
It was the best job offer Joe had ever received, but the timing couldn’t have been worse. Six months earlier, he had left his full-time job as an editor at a children’s book publisher to dedicate himself to his own small production company, Wide Awake Multimedia. In that time, Wide Awake had already completed and sold two educational titles, and Joe had many other well-developed plans for future projects.
I realized that I’d grown to love working for myself, especially now that my work was starting to catch on. It took a lot of persistence to get to that point, and I didn’t want to give up my autonomy.
Then again, I knew that growing my own operation would mean looking for financing, hiring people and other chores that would eat up my creative time and, if I wasn’t careful, burn me out entirely. Sure, I’d lose some control at Somniana, but I’d also be able to leave a lot of the boring, everyday bureaucratic stuff to them. That was tempting.
After a couple of sleepless nights, I realized I wasn’t ready to make the decision. I needed to reevaluate my business and my goals and just about everything else.
…
Pitfalls of Unmanaged Growth Inability to meet performance standards Low employee morale and high turnover Loss of profitability Loss of customer loyalty Lower quality and professionalism Slowdown in business learning and competitiveness Inability of overworked leadership to provide direction Cash flow problems Financing problems Inefficient use of resources Stress and burnout Loss of focus on core objectives Poor communication among employees
Is Your Business Ready to Grow?
The most common obstacles to successful growth are insufficient planning and failure to follow an existing plan. Additional organizational obstacles to growth include:
Insufficient access to capital
Insufficient expertise
Insufficient contingency planning and risk management
Unwillingness to change
Inability to work with growth partners
Inability to change processes
In most cases, you can’t grow safely unless you have a rock-solid core business that is strongly competitive within its market. You must be fully committed to this core business before you consider growth. You should know it inside and out, and you should also know your target markets and understand any trends affecting them.
It’s seldom wise to diversify into a type of business in which you lack expertise. That doesn’t mean that you shouldn’t consider new product lines or new possibilities for old ones. But the best foundation for growth is the area where you truly excel.
That said, with proper research and risk analysis, new product lines, customers or markets may be the ideal way to grow.
Are You Ready for Growth?
As we noted earlier, entrepreneurs are born innovators. But once they reach a certain level, it’s natural for them to worry about rocking the boat. It’s often useful to identify the source of the worry and assess how realistic it is.
Many of the problems entrepreneurs face during growth stem from the fact that skills it takes to launch a business are quite different from the skills it takes to grow. Fast growth requires management structures and skills first-time entrepreneurs often lack.
Further, growth usually requires business owners to give up some control and authority. For some entrepreneurs, this may be the first time they’ve had to delegate important tasks to others, and it can take a fair amount of psychological adjustment.
If you’re a micromanager who loves calling all the shots, you’ll need to ease up and give employees the latitude they need not just to do their assigned tasks, but also to innovate and improvise when necessary.
You must also be prepared to change the look and feel of your business. Products, processes and partners you’re familiar with may need to fall by the wayside. A comfortable corporate culture may need to be transformed. Loyal employees may need to be reassigned, retrained or even replaced. Making changes like these can be emotionally difficult for you, your employees and your customers, in addition to being time-consuming and costly.
Here are some additional worries you might have when considering growth:
Fear of failure. How much do you have invested in your business? Is it possible you could lose everything? If you feel like there’s too much at stake, it’s a good sign that you should postpone growth until you’re in a stronger position.
Fear of success. Are you worried about what will happen if your business grows? Will you have to give up the aspects of your business you enjoy most in favor of dull managerial tasks? Will you still have enough time for family, friends and leisure activities?
Fear of giving up authority. The bigger your company gets, the less direct control you’ll have over it. Also, if growth requires external capital, you might have to give up some equity to an investor. How much control are you willing to lose in order to grow?
Fear of responsibility. Growth is always a gamble, and the outcome will affect the lives of your employees and their families. Can you handle this level of responsibility?
Fear of humiliation. Are you worried that if you fail, people won’t take you seriously if you try to start over?
Although change can be frightening, it’s also true that the most exciting and positive events seem to happen in times of crisis: People develop new skills, challenge themselves and discover their hidden potential. Growth without uncertainty and crisis is simply not possible.
This doesn’t mean your business can’t grow unless it suffers some disastrous near-meltdown. By “crisis,” we simply mean a point at which you must let go of old ideas and adapt to new circumstances.
GROWTH Strategies
Your business is profitable, you’re up to date on the dynamics of your market, and you know the direction in which you want to go. You want to take your business to the next level, either by increasing your customer base, tapping into a new market, or offering additional products or services.
There are two basic ways to accomplish this:
Vertical growth happens when you increase sales of an existing product within an existing market. This tends to be the safest form of growth, because it usually doesn’t require a large increase in manufacturing, personnel or warehousing costs. It also tends to be less disruptive to business processes.
Horizontal growth happens when you offer a new product or seek out a new market for an existing product. The riskiness of this strategy varies depending on how new and different the product or market is. Sometimes, it may require nothing more disruptive than creating a new marketing plan, adding additional sales people or offering your products online. In other cases, it will take plenty of new capital, as well as huge changes to business structures.
Building Market Share
Building market share means winning new customers, often by coaxing them away from your competitors. This could entail vertical growth (e.g., attracting new customers in an existing market) or horizontal growth (e.g., adapting your product to appeal to new market segments, or diversifying into new product lines).
Understanding your competitive landscape is essential to building market share, as is understanding the potential value of your product to different market segments. Without this understanding, you’ll find it difficult to communicate your competitive advantage and give prospects a compelling reason to switch.
It’s seldom wise to expand rapidly into a type of business in which you lack expertise. This doesn’t mean you shouldn’t consider new product lines, or new possibilities for old ones. But the best foundation for growth is the area where you truly excel.
When pursuing new markets, it’s crucial to maintain high service standards for your existing customers. Remember: Gaining new customers only leads to growth if you keep your existing customers!
Demand Innovation
Demand innovation is different from product innovation in that it focuses on business opportunities that stem from customer use of your product, rather than on the products themselves.
For example, your product may be used in tandem with other products, or it may serve multiple users, or it may serve a single user in multiple ways. These uses may create new customer demands, some of which may never have occurred to you. They may lead you to offer installation, maintenance or training services. Whatever the case, sale of your product becomes a jumping-off point for discovering new service offerings that will meet a wider range of customer needs.
Redesign
Changing your materials or processes may give you access to a previously unavailable market. Innovative packaging, or the use of recyclable and sustainable materials, can lower production costs while increasing consumer appeal and growth opportunities.
Servicizing
Growth based on selling the function of a product as opposed to the product itself, or by increasing adding services to an existing product, is an increasingly common method of growth. Car-sharing businesses are a good example. Another example would be a business that offers a long-term service or consulting relationship with its product.
Strategic Acquisitions
Strategic acquisitions typically involve buying another business that will help you reach new markets or better serve an existing one. Growth through acquisition of an additional business depends on:
Tax considerations
The industry and type of companies involved
The regulatory environment
The amount of assets involved
Cash flow
Assets
Sales, cash, profitability, and break-even projections
Market position
Organizational culture
Advantages of merging (synergy with your business)
Legal considerations
Management control of the new business
This tends to be one of the riskier methods of growth. It usually requires considerable due diligence, in addition to excellent legal advice and access to adequate financing.
Joint Ventures and Partnerships
Growing by entering into a partnership entails choosing a partner with complementary skills, technologies or products to achieve things neither business could do alone. This can be a good way to:
Minimize risk
Achieve economies of scale
Create synergies
Gain technical knowhow
Expand geographic reach
Acquire patented products or processes
Expand your customer base
Lower costs by pooling expenses
Increase product offerings
Alliances and partnerships can be as complex or simple as you choose to make them, but the principle always remains the same: You must identify what each side contributes to and takes away from the deal.
Going International
As we will discuss in the next chapter, e-commerce and globalization have made international business an attractive option for entrepreneurial growth. In order to determine if exporting or importing is worth pursuing, you will need to prepare a professional international marketing plan.
Consulting
It may be that over the course of your business, you’ve built up a certain type of expertise or developed the ability to solve certain types of problems for suppliers or partners. If so, you may be able to grow by making that expertise available to others.
…
I had to think fast, because I knew Somniana’s offer wouldn’t be on the table forever. But I also needed some breathing room. Even more than that, I needed to talk to people. My wife, obviously, but also people who knew and appreciated my work. I felt like I’d lost sight of what was best for me, and I needed the people I trusted to get me back on track. Because on my own, I was getting nowhere.
In order to buy himself a little time, Joe called Somniana Productions and arranged to meet with them the following Monday to discuss their offer.
With that out of the way, he sat down to take a hard look at his business. He knew what his current revenues and expenses were, and he had projections for upcoming projects. But he didn’t have a clear picture of his business model.
Who was his ideal customer? What sort of project was most suited to his strengths and interests? Which production duties had to be done by Wide Awake, and which could he outsource to other businesses? Should he grow his business? More to the point, could he grow it? Did he have the skills, drive and time for all the tasks growth would require?
Looking over my business plan, it occurred to me that it was very much out of date—almost two years old. It wasn’t just that my goals and capabilities had changed in that time, although that was the first thing that jumped out of me. It was that everything had changed.
Two years in this field is practically a lifetime. There was new software, there were new payment and subscription models, new educational standards, new rules, new opportunities, new competitors, new deployment possibilities, new everything. A lot of my business plan might as well have been written in 1980 for all the relevance it had to my current options. So I decided to take the time I had to revisit my business plan.
…
Planning for Growth
Successful entrepreneurs distinguish themselves by their ability to plan for growth. They identify trends that are likely to affect the business environment. They plan for their financial needs and begin laying the groundwork for additional financing long before they need it. They create management controls to sustain performance, utilize budgets to safeguard cash, and identify the staff they’ll need in order to grow.
Most important of all, they revisit and update their business plan.
Is it Time to Grow?
You should have all of the following elements in place before you consider growing your business:
A profitable business model
Proven operating procedures that have been set down in writing
A commitment by you and your employees to your company’s core values and mission
A clear understanding of your current and future customers
A stable or growing market demand
Scalable and flexible IT and online tools, systems and processes
Good relationships with suppliers and a reliable supply chain
The ability to provide additional training to your employees if needed
Consistent processes for hiring, training, assessing and terminating employees
An emotional and intellectual openness to change
Access to growth capital
Update Your Plan!
Once you decide it’s time to grow, the first step is to review your business plan. Consider these issues:
What new threats and opportunities will my growing business face?
What is my market potential?
What new resources and equipment will growth require?
How will I maintain good customer service during the growth phase? How will I continue to meet my quality and service goals?
Will new regulations apply to my products, employees or raw materials?
How will the cost of growth affect profits? When will I break even?
Will I have new competitors? How will they react?
Will I need to retrain current staff or hire new staff? Will I be able to manage new team members effectively? Will they work well with existing employees?
Will I need to change my location or supply chain?
How much financing will I need, and where will I get it?
What risks will growth create for my culture, customers and cash flow? What steps will I take to mitigate these risks?
…
I spent several days and nights reworking my business plan. Of course, I couldn’t update it completely in that time, but at least I was able to look at the current market conditions and asssess the skills I’d developed over the last couple of years. I also came up with some basic sales forecasts.
My primary conclusion was that I had been selling myself short. I had a solid body of work for some big clients, and I was doing better every year. And for all my concerns about employees and payroll and the rest of it, I was handling all of that reasonably well. I have a good lawyer, a great accountant, detailed financial records. I’m good at guiding teams and keeping projects on track.
That was my biggest takeaway from looking closely at my business: I’m good at this stuff. Like a lot of people in my field, I’d always thought of my creative skills as the core of my business. But looking at my business plan—seeing where I wanted to be two years ago, and where I was now—I realized I couldn’t have gotten that far without having a knack for running a business, too. That gave me a lot more confidence.
Joe felt he had identified Wide Awake’s greatest strengths: conceptualizing new projects and assembling skilled teams to perform the production work. He decided to focus on pitching concepts and projects to large, national content providers.
Joe estimated that in order to meet his professional targets and personal income goals, Wide Awake would have to produce at least eight major projects a year. That would require him to move into a larger office space, hire two project managers and invest in new equipment.
It would be a lot of work, but with his newfound confidence in his management skills, Joe was eager to face new challenges. By Sunday morning, he had made the decision to pass on Somniana’s job offer.
…
Considerations for Growth
Planning for growth means assessing your operations and measuring your efficiency. This is a chance for you to look into all the nooks and crannies of your business and address any problems you may have been putting off. This checkup will help set your course for the future. As you perform the assessment, look at your business as a prospective buyer would:
What are your business’s strengths and weaknesses?
What could you be doing better?
Which areas of the business have given you the biggest challenges?
Which areas of the business have you been ignoring?
Has your business realized its potential?
Do you have a realistic vision for the future, and a sense of the strategies and tactics required to achieve it?
Your Customers
The needs and tastes of customers change constantly. Therefore, one of the biggest challenges for a growing business is to have a thorough understanding of its customers and markets. Consider these questions:
What percentage of your business is repeat business?
How large is your overall market?
How large is your customer base?
How has your market changed since you’ve been in business? How will it change as you grow? How will your marketing strategies need to change as you grow?
Has your market continued to grow, or is it leveling off or shrinking?
Your Competitors
As you grow, you will naturally encounter new competitors. You will also create competitors; if your idea is a good one, you can be sure that other people will emulate it. Thus, your growth plan should address how you will cope with existing competition, new and current competition, and emerging competition.
Who are your current competitors? How do you differentiate your business from theirs? How will they react to your growth plans?
Who will your competitors be as you grow? Will they be local, regional, national, international or online? What steps will you take to stay competitive?
Your Profitability
Even the most talented entrepreneur cannot grow an unprofitable business. Before you go any further, you need to assess whether or not you are generating a profit.
What are your variable costs? What are your fixed costs? What cost-cutting options are available to you?
Have you created sales forecasts using different pricing method?
What is your target profit margin?
How are you currently pricing your products or services?
Does your price structure allow you to earn your target profit margin?
Are you managing receivables and payables to optimize your cash flow?
How do your prices compare to those of your competitors?
How do your prices position you in your customers’ eyes?
Your Team
Growing businesses must assess how well employees and contractors are performing and identify areas for improvement.
How satisfied are you with your team’s performance?
Is your management team competent?
Do your people have the skills they need? Is their expertise current?
Are you compensating your team appropriately?
Is your team happy and having fun?
Do you set performance goals for your team? How do you reward your team?
Can you use social networking tools to optimize team performance?
Do you have any problem employees?
What is your rate of employee turnover?
What tasks do you need to outsource?
Do you need to hire more staff or contractors to grow? Will they need training? How will you minimize friction between new and old employees?
Your Operations
How well a business manages its operations determines its ability to overcome the problems and challenges that growth poses. How does your business measure up?
How are you managing your raw materials? How are inputs ordered, counted, inspected and stored?
How good are your relationships with your suppliers? Can you negotiate favorable terms or extended payment plans?
Does your workspace foster productivity and efficiency?
Is your equipment up to date and well maintained?
How much inventory do you keep on hand? Are you able to fill orders reliably?
Are you distributing your products in the most efficient and effective way?
Are you managing energy and other resources wisely?
Are you satisfied with the overall quality of your operations? Do you have adequate management systems in place?
Do you keep organized, accurate records?
Are your office, warehouse and other facilities big enough to accommodate growth? If not, will growth be reliable enough to cover your expansion costs?
Are you making good use of available technology? How can current and emerging tools improve your operations?
Your Financing
The growth of your business depends on how well capitalized it is and how well it manages its resources.
What are your sources of financing?
How much does your financing cost?
Are you adequately capitalized?
What is the value of your business’s assets?
What is the value of your business’s debts?
…
I spent Sunday afternoon focusing on the strengths and weaknesses of my business. On the plus side, I had great people. I had an amazing team of contractors who, between them, could solve just about any problem I threw at them.
I had a multimedia designer with expertise in digital editing and animation, and a design sensibility that complemented mine. And I had two very close friends I could rely on for smart feedback about my production ideas.
On the negative side, most of my problems came down to time. I had good management skills, but when production got heavy, I was sometimes forced to drop the ball. I’d always been able to play catch-up and get back on track, but that took time away from other jobs and stretched my time budgeting further.
Also, if I got sloppy about tracking hours and expenses, my estimates after the fact tended to be on the low side. This was bad for business, and it also didn’t make me feel great about myself. So that was a problem I needed to solve.
Joe realized that what Wide Awake needed most was:
A business manager to organize project billing and expenses, payroll, overhead expenses, and equipment repairs
A team of three full-time project managers
A bigger office space
Project management tools
Equipment upgrades
He calculated that these things would cost Wide Awake about $300,000 in the first year. He knew he couldn’t afford to borrow that much money, and he was pretty sure he couldn’t raise it through crowdfunding. But how else could he finance his growth?
…
Problems and Solutions
In this section, we’ll look at a few of the major challenges that growth can pose and offer some potential solutions.
Moving Too Fast
Being in a hurry to grow can result in poor decision-making, which often causes problems in the long run. Planning ahead helps you to act more quickly and to solve problems before they become disasters.
Solutions
Slow down and take the time to analyze the long-term consequences of your decisions. Review decisions before you implement them, particularly in the early stages of new business development.
Avoid making rash financial decisions. Entrepreneurs regularly make the mistake of putting their life savings into a project in order to avoid applying for a loan or going through some other time-consuming process.
Growing Too Fast
A common problem for high-growth businesses that have latched onto a significant technological breakthrough, or tapped into a fast-paced trend, is that there may be a much greater demand for the product than anticipated.
Although this might seem like a problem you’d love to have, it can destroy a business that lacks access to adequate growth capital. Too often, businesses go from booming sales to bankruptcy because they fail to notice the warning signs of out-of-control growth. These signs include:
Cash flow problems
Employee turnover or dissatisfaction
Poor day-to-day business management
Increased customer complaints
A lack of focus on the business’s core competencies
Diminished quality of products and services
Solutions
Keep your business on track by limiting your business to a set level of customers, a specific geographic region, or a particular order size. These limits aren’t permanent; they just keep growth manageable over a specified time, so you can pace yourself and plan intelligently for the next stage of growth.
Take the time to anticipate ramp-up costs if yours is a rapid growth business. If you have limited personal access to additional financing, create a cash flow model that determines how much additional funding you’ll need to keep pace with demand.
Although it may not be possible to include all of the potential expenses of growth, a reasonable estimate of these costs is essential in determining ongoing needs during a high-growth phase.
Remember that as your business grows, your workload will increase. Some businesses fail because the owners are too busy making products or filling orders to take care of essential management tasks. The ability to delegate responsibility and authority at this stage is crucial.
Look for your next level of financing early. Bank negotiations for second-round funding can be slow, especially when there’s a short time between the first round of funding and a request for expansion funding.
Avoiding Innovation
When businesses become complacent about their success, they may ignore new technological developments or looming changes in customer demand or competition. Soon, growth slows and fizzles, leaving the entrepreneur wondering what happened.
Solutions
Never stop learning. Stay on top of emerging issues by reading trade journals, and attending industry trade shows and functions.
Keep close tabs on what your competitors are doing, and do your best to understand what market conditions are driving their decision-making.
Encourage innovative thinking. Always ask yourself and your team, “Can we do this better?” and “Are we being as creative and efficient as possible?” Don’t take any materials or processes for granted. There’s always room for improvement.
Understand your customers. Has the market for your products or services changed? Are your customers’ needs, habits and preferences changing?
Ignoring Employee Management Issues
Growing businesses often focus on making sales and meeting orders at the expense of managing employees. This can result in poor communication, inefficiency and low morale.
Also, if growth forces you to hire new personnel, your regular employees may feel threatened or crowded.
Solutions
Allocate responsibility by creating and updating an organizational chart for your business, including written job descriptions. Who reports to whom? For which tasks is each person responsible? What deadlines apply? How frequently will you evaluate performance?
Reassess and update employee compensation and incentives at least once a year.
Set clear objectives for each person’s performance. Update these objectives frequently with a formal performance evaluation system.
Before hiring any new workers, meet with your current employees and explain your plans. Where possible, ask for their help and insight in creating and structuring new positions. In some cases, it may be wise to let current employees apply for these new positions before you start interviewing outsiders.
Invite existing employees to participate in creating new job descriptions and interviewing prospective team members.
Treat your employees as you would like to be treated.
Workspace Limitations
Growth may require you to seek out a larger office, factory or warehouse in order to make room for additional equipment, materials, inventory and staff. You may also need to remodel in order to provide more restroom facilities or a larger break room or meeting area.
Too many growth-oriented business owners take the risk of moving to new facilities in advance, after guessing what their space needs will be. At best, this is a gamble. If it fails, you may find that you’ve committed yourself to paying extra money for a space that’s larger than you need in the short term. Decisions about facilities should be made calmly and with a clear head.
Also, remember that moving your operations may be complicated, distracting and confusing. If you’re truly committed to growth, you won’t want to hobble yourself with these problems at the outset.
Solutions
Look for an extended period of growth—or a very solid promise of it—before making any big moves.
If your office is getting a little cramped—but is functioning well otherwise—think of it as a temporary sacrifice to make a move more feasible. (Be sure to explain this to your employees!)
If cramped facilities are making it hard to get things done, you might consider a creative, short-term solution, like renting or subletting a separate facility for one or two of your departments until you can afford an ideal space.
Technological Limitations
Growth often requires new equipment, new computers and networks, faster Internet connections and so forth. Before you grow, make sure your business systems and equipment are up to the job.
Solutions
Look at all the systems that help you run your business. Will you be able to meet your goals with the existing systems, or will you have to upgrade? Business owners who overlook the strain that growth puts on these systems often end up underestimating costs.
Remember that all new business systems have a learning curve. Also, they need to be tested thoroughly to ensure that they’re right for your business. Always allow ample time to evaluate new systems and work the bugs out.
If your suppliers offer training on new software or equipment, take advantage of it. You should also keep up with upgrades and new capabilities.
Many businesses neglect the expense of buying new software as they grow. If you’re adding personnel, consider how this will affect software needs and subscription-based online services.
If you will be working with contractors or virtual teams, or allowing employees to use their own devices for work, make sure your technology works well across platforms and devices.
When you can’t afford to create an in-house capability for a specific business function, or it’s not really a core competency, consider outsourcing it.
…
It was late Sunday night, and I was frustrated. That morning, I’d known exactly what I wanted to do. But then I looked at the amount of capital it would take to get things moving, and it all seemed hopeless.
Even if I had access to a $300,000 loan—which I didn’t—my wife and I would’ve balked at taking on that much additional debt. So I felt like I was right back at square one: If I can’t grow my business enough to meet my goals, I can’t maintain my autonomy. So I may as well take the job offer.
Suddenly, Joe realized that a perfect solution was right in front of him. Why not propose a partnership between Wide Awake Edutainment and Somniana Production?
As Joe saw it, both companies would benefit from the arrangement. Wide Awake could move into Somniana’s office space, share their receptionist, and contract with their studio to handle all film and pro audio work. Wide Awake would save money by not paying rent and would have, in effect, its own in-house production studio.
In exchange, Somniana would get an in-house content creation department. Joe would bring along his team and give Somniana first rights on Wide Awake’s titles. Somniana would also expand its revenues through the additional production work, while learning the content creation and project management business from the inside out.
It seemed like a perfect strategy. Joe calculated that if Somniana Productions liked the idea, he would need only $150,000 for the first year. After that, he calculated that the business would be able to pay additional managerial salaries out of earnings.
On Monday, Joe turned down the job and made his joint-venture pitch to Somniana Productions. They liked the idea of having Joe and his creative team onsite. And they really liked the fact that he would bring four projects already in the works.
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Tools for Growth
In a period of growth, whether planned or unplanned, good management techniques are the best tools you can have at your disposal.
Cash Management
Good cash management strategies show lenders and investors that you know how to run a profitable business and will be able to service your debt. This is why you should cultivate relationships with prospective funding sources while your business is doing well.
Your ability to manage cash skillfully determines your business’s ability to grow. By contrast, poorly managed cash can drain your business’s vitality in the blink of an eye. Here are several of the biggest drains on cash that a business can have:
Interest payments on debt
Cash tied up in excess inventory
Uncollected accounts receivable
Projecting, monitoring and conserving cash is not one of the more exciting parts of managing a business, but it can be the most important. If you’re not good at tracking spending and calculating your cash balances, hire someone who is.
Team Management
The success or failure of your growing business hinges on your ability to think strategically, delegate when necessary, and manage people, time and resources. Your task is to maintain the internal health of your organization during these turbulent, exciting times. This means creating a system of checks and balances that will allow your business to perform consistently, professionally and profitably.
The key to being a good leader is creating a good team. This means gathering committed, inspired people who will work together toward shared goals. These people need not all be full-time employees, but they do need to be aligned on goals and in close communication with one another. You can’t grow your business alone, so start building a high-performance team now.
Focusing on Innovation
The role that innovation plays in attracting and keeping customers cannot be overemphasized. Whatever your business does, countless competitors are trying to do it better. In other words, what’s great today may not be good enough tomorrow.
Planning for growth should include a focus on innovation. If you aren’t emotionally and intellectually prepared to innovate, your employees won’t be either. Empower them to act and think in creative ways, without facing censure when things don’t work out perfectly. Treat these events not as failures, but as moments for learning.
You can also turn to your best customers for ideas. As everyday users of your product, they may be able to help you make incremental or even breakthrough changes. Last, consider getting a fresh perspective by inviting outsiders to help you with innovation.
Budgeting and Financial Management
Forecasting and planning are the cornerstones of well-managed growth. It’s very important not to ignore these critical functions before, during and after a growth period. We have discussed these issues at length throughout this book, but here are some additional things to consider:
Everyone in your business should be involved in forecasting costs and sales. Giving each department input into the process will produce company-wide data and encourage employee buy-in.
Many employees resist planning efforts because they don’t see what’s in it for them. Explain how their activities fit into the big picture, and motivate your team to make their best efforts.
Use the best tools available to you. Software packages and networked hardware can aid you in developing a sales forecast and driving it through the rest of the accounting system.
Define your goals and objectives at the outset of your planning efforts.
Focus on the projects, products and customers that offer the greatest potential for revenue and profit.
Company-wide goals should be linked to company-wide rewards. Remember, you’re all in this together!
Aim for continuous improvement, not perfection.
Once you begin to implement your growth plan, financial management becomes more important than ever. Chapter 18 Budgeting, Chapter 19 Cash Flow Management, and Chapter 26 Financial Management will be well worth revisiting at this point.
…
Six months after Joe approached Somniana Productions, they finished their first joint project: An animated series on evolution and biodiversity in the Amazon rainforest, which has since become a standard teaching tool in middle-school classrooms. The members of both teams work well together and often learn from one another.
The partnership has allowed Joe to focus on his primary strengths: Writing, scientific visualization, and instructional design. He’s been able to delegate many everyday, noncreative tasks to other staff members, which has given him much more time to brainstorm new projects and keep his skills current.
People tell me I’ve come a long way, and it’s true. But the important thing isn’t the distance we’ve covered, it’s the route we took from point A to point B. After all, you can cover a lot of ground by going in circles!
My business plan served as a map and a compass at a time when I was heading into totally uncharted territory. More than that, the process of planning challenged me to think about where I was and what I wanted. That was the foundation for everything I’ve accomplished since then.
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Conclusion
The biggest challenge growing businesses face is maintaining professional, consistent performance. Too often, they fail to serve customers, move away from their core competencies, and experience cash management problems or worse.
Managing customers, cash flow, team members, stress, and technology are just a few of the challenges you’ll face as you grow. Planning now to meet and overcome these challenges will greatly increase your business’s chance of thriving during a phase of rapid growth.

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| NxLeveL® TECH TIP BUSINESS RESOURCES AND THE WEB
Contracting and Outsourcing Resources During the growth phase, you may find yourself suddenly needing skills that no one at your business has. The following sites can help you get the staff and services you need. Upwork allows you to locate freelance virtual assistants in a variety of fields. You can search by skills, location and many other parameters. You can also post jobs for free. www.upwork.com Elance will connect you with millions of skilled freelancers from all over the globe. Whether you’re looking for mobile developers or international marketing experts, you’ll find them here. www.elance.com The Outsourcing Institute offers a wide range of information on the strategic leveraging of outsourcing resources and capabilities. It also offers a matching service that connects service providers with businesses that are looking to outsource. www.outsourcing.com