The Do's and Don'ts of scaling your company
Many ambitious entrepreneurs want to scale their businesses. While an enormous amount of resources are often required to fuel constant growth, scaling is a more sustainable way of generating more revenue whilst keeping operating costs low. However, scaling successfully is not without its challenges.
Despite the name, the realities of scaling mean it often feels nothing like clean and smooth progression. It is often a messy, unpredictable and sometimes frighteningly risky experience. To ride out the storm of scaling to success, you want to have a well-resourced, properly organised and fully skilled finance team on your side.
Here are my Do’s and Don’ts for scaling your company:
Concentrate on cash flow above all other financial matters
It isn’t just loss-making companies that fail. You can watch a fast-growing and profitable company go bust very quickly because the cash ran out due to poor planning.
Here are three tips to better manage cash flow:
Payments: Establish clear payment terms and conditions for customers, and make it automatic, or at least easy, for customers to pay.
Forecast your cash flow so you don’t get caught out by big bills like tax and VAT
Chase up debtors. Always. And firmly.
Get funding lines in place before you need them
Too many entrepreneurs wait until it’s too late to seek funding, or don’t ask for a sufficient amount of funding in the first round. The right time to seek funding is when your business is a good proposition for a lender, and before rapid growth puts too much stress on your working capital.
When looking for funding, go out and compare different funding offers before settling on your bank’s. Do consider alternative funding options – a good accountant can help you assess whether to go with an equity injection, long term borrowing, short term borrowing or alternative sources of finance.
Invest in a decent finance function
Accounting and finance may seem like a complex and time-consuming task, but it is absolutely crucial to the success of your business. Whether you hire an in-house team or choose to outsource your finance function, be prepared to pay for quality and commitment.
A good finance team will...
Provide excellent data analysis and forecasting to support you in making important business decisions.
Be masters of modern technology, run a paperless office and close the month end fast… without costing the earth.
Ensure you never miss deadlines or compliance requirements.
Keep your staff happy with a well-run payroll and slick expense claim process.
Free up your time as a business leader to concentrate on what you do best.
A decent finance function will increase your profitability and become more cost-efficient as the business scales. And of course, knowing that you have expert eyes on your business will do wonders to relieve your stress.
Be “too busy” to engage with your finance team
Even a first-class finance team will struggle to deliver without adequate input from the business leader. The truth is, there is nothing in finance that is too difficult to understand. Entrepreneurs and business leaders who hide their disinterest behind a lack of understanding or busy-ness are highly unlikely to scale their business successfully. Every key decision should be made with the financial reports in your hand.
Bury your head in the sand
If you start to see warning signs, then you must face the facts and seek a solution as fast as possible. A good accountant will help you navigate through stormy waters. They will help you make data-driven decisions and assess priorities. They will prepare business plans and solid forecasts for investors. They will help you negotiate or re-negotiate terms. If you have to downsize, they will help you work out which costs to reduce, and which might be false economies.
The good news is that an accountant who implicitly understands the scale-up business lifecycle will have a hands-on, proactive approach to spot opportunities and catch early warning signs.
Here at Finling, we understand the challenges of scaling a business and seeing it through the “messy middle” years.
And like you, we’re frustrated when SMEs are offered poor financial advice and levels of service that don’t suit their needs.
We're here to help make scaling a company smoother, less stressful and more rewarding for entrepreneurs. Get in touch with us today.