Let me tell you about two business owners.
One couldn’t sleep at night. She was concerned that her company’s growth was getting out of hand. She wasn’t sure if she could afford to scale the business and didn’t know what scaling meant in terms of cash and profitability.
She made the decision to get outside help putting extensive financial and operational strategies that would ensure she would meet her goals against her plan.
The other business owner was a growth “junkie.” He wanted to grow, grow, grow and all he talked about was revenue, revenue, revenue. His stakeholders asked him to get outside expertise to make sure he was keeping his eye on profits, but he opted to hire a salesperson instead.
The business owner who couldn’t sleep at night turned out to be a great student. She had a plan and received financials that informed her about her business lines. She consulted with us about strategic direction at every turn and this helped the company decide to expand in some areas and also to walk away from a really poor acquisition possibility.
This business owner can now sleep at night and is a very smart strategist and entrepreneur. She has even set herself up for a successful exit from her business.
The salesperson the growth junkie business owner hired did continue to grow the business, but the growth was out of control. It got to the point where the company was in full turnaround mode. Not the place to be if you want solid success.
A study from Bain and Company1 found that only one in seven companies are able to achieve sustainable, profitable growth.
This is a scary statistic. It means that the choices you make about how to grow your company will be the deciding factors with regard to what side of the one in seven equation you’re on.
Here’s what business owners need to do to avoid crash and burn:
In the finance arena, make sure:
- That as the business owner, you understand the importance in investing in finance and operations.
- You’re not on the growth junkie tract (you’ll know you are if all you think about is revenue).
- Your company isn’t “hero-powered” – that one person isn’t making all the decisions in a vacuum.
- Your company’s growth is sustainable – scalable and predictable.
In the operations arena, make sure:
- Your company is process, not people driven.
- Your company’s internal processes are not being adjusted by internal entrepreneurs.
- Your people are open to change as the company grows (in particular, make sure that you’re not operating a certain way just because “we’ve always done it that way” – you want your processes to keep pace with your growth).
- You have sufficient control points and exceptional quality control in place.
The moral of the story: Business owners need to think of good financial and operational strategies as an investment in the future of their growing company. These strategies are, in fact, the very building blocks for profitable and sustainable growth.
As veteran turnaround CFO, I’ve seen too many companies ignore making this investment to their own detriment. Starting off on the right foot toward faster growth will prevent you from putting the business you worked so hard to build in jeopardy. But while this may make logical sense, you’d be surprised how many business owners neglect to put a strong foundation in place.
My only advice to you – don’t be one of them.
Tags: Business Growth, cash flow, CFO, Fast Growing Companies, financial, financial growth, financial management, financials, operational strategies, operations, Outsource CFO, outsourcing operations, profitability