Following a successful start up where the business has established itself in the market place a period of rapid growth in sales, profits and the size of their organisation often follows.
This brings new challenges in wrestling with the transition from start up to maturity including the building of a management team, possibly moving to larger premises, installing appropriate IT systems, infrastructure etc.
There may also be implications from growth, including an additional requirement for finance, working capital and cashflow together with avoiding the dangers of over-trading.
We at incisive also believe that businesses at this stage of their lifecycle require reliable management information most usually in the form of management accounts produced to enable the management team to manage their business more effectively.
Perhaps the biggest challenge to business owners in this phase is their own personal transition from expert tradesman to an effective business leader committed to a clear business plan. The transition, whilst necessary, is often a hard one to make.
As the business grows and takes on greater scale, a genuinely valuable asset evolves. It is therefore imperative that appropriate agreements are in place between shareholders and partners to avoid disputes and to secure valuable tax advantages, remuneration, and ultimately on the disposal of the business.
Key Questions for business owners in the growth phase
- How much time do you spend working on the business as opposed to working in the business? In other words, working on the strategic development of the business as opposed to merely handling the 'day to day activities'.
- Has this changed in recent times and do you see it continuing to change in the future?
- How do you make important and difficult decisions about the future of the business?
- Who do you talk to?
- What would happen to the business if you or any of your co-owners are unable to work?
- How do the finances of the business work?
- To what extent do you rely on your bank to provide support and how does the relationship work?
- Have you developed a policy for paying yourself a bonus or extracting some cash to reflect all your hard work to date?
- Where do you see the business in three years time? Do you think you could sell it and retire to the beach?