Getting To The Next Level
Fifteen Tips To Keep Your Company Growing
Maureen Farrell and Mary Crane 08.08.08, 9:00 AM ET
Every successful company needs a good idea, good people and a good plan. Keeping a company growing, however, is harder still, mainly because the game changes the bigger it gets. A small business with $500,000 in revenue trying to get to $5 million has different operational, financial and human resources challenges than a company with $25 million stretching to hit $100 million. With that in mind, here are 15 tips to help you navigate growth at three different stages in your company's development cycle.
Tip No. 1: Getting From $500,000 To $5 Million In Revenues
Chart a (realistic) financial course. The thrill of your first sale has past, now it's time to get out the Microsoft Excel spreadsheet. But before you fall in love with those pretty five-year financial projections, mind your cash. Unless you socked away a pile from a previous life, one wrong move and you won't be able to cover next month's inventory or interest payments.
Tip No. 2: $500,000 To $5 million
Focus your energies. At this stage, nearly every ounce of investment (in cash and time) should go toward perfecting your product and building a solid reputation with customers. "Don't think about public relations or broad-based marketing," says Paul Maeder, founder of Highland Capital Partners, a Lexington, Mass.-based venture capital outfit. "The only people you talk to at this stage are customers and potential customers."
Tip No. 3: $500,000 To $5 million
Craft your story. You've had some success with your product, and you are still able to manage day-to-day operations. But can you convince deep-pocketed investors to help you get to the next level? If not, find that charismatic someone who can weave a compelling story.
Tip No. 4: $500,000 To $5 million
Build an advisory board. Advisors are critical to growth not only for their business acumen but for their contacts with other companies, vendors, clients and industry professionals. Advisors also add a whiff of legitimacy. "Most investors will say they will invest in a B-class idea with an A-class team over an A-idea with a B-team," says Partrick Ennis, managing director at early-stage investing firm ARCH Venture Partners. (For more on how to build an advisory board, see "How To Set Up An Advisory Board.")
Tip No. 5: $500,000 To $5 Million
Befriend bankers. Even if your capital needs are modest, now's the time to start courting future financiers. Those relationships come in handy when credit gets tight. David Guernsey, CEO of Guernsey Office Products in Chantilly, Va., and vice chairman of Virginia Commerce Bank, says bankers look for the three C's: collateral, competence and character. In this environment, spreadsheets alone don't cut it. "Bankers can't [measure] competence or character if they don't know you," he says. For more on working with banks, check out "How To Tap Lenders When Credit Is Tight."
Tip No. 6: Getting From $5 Million To $25 Million In Revenues
Set up critical systems: hiring. If you want to keep growing, hire six to 12 months ahead of the sales curve. Adding quality people at a decent clip means defining requirements and establishing efficient processes. Also think about adding a benefits package (preferably one you can afford). For more on hiring, check out "How To Hire Outside The Box."
Tip No. 7: $5 Million To $25 Million
Set up critical systems: Create an employee handbook. With size comes entropy. Tame it by spelling out how to deal with everything from vacation time to general intransigence. "The first day an employee walks into the organization, this should be part of their indoctrination," says Maria Pinelli, Americas Director of Strategic Growth Markets at Ernst & Young. Have all strictures reviewed and approved by your attorneys.
Tip No. 8: $5 Million To $25 Million
Set up critical systems: sales. To ramp up sales, standardize operations so you can effectively track orders and stay close to customers. If you don't know who is buying and why, your growth story will have short legs. Better yet, bother to figure out what your best salesperson does and make sure others follow suit. (For more on improving sales, see "How To Break The 80/20 Rule.")
Tip No. 9: $5 Million To $25 Million
Set up critical systems: the back office. Intuit's QuickBooks can only get you so far these days. A growing firm needs a scalable accounting system that can also spit out detailed financial reports to keep you on plan.
Tip No. 10: $5 Million To $25 Million
Get out of the way. If you haven't thought about hiring professional management, now's the time. This includes a chief executive, head bean counter and perhaps even a human relations manager and full-time legal counsel. Oh, yeah: This also means stepping aside so these folks can do their jobs.
Tip No. 11: Getting From $25 Million To $100 Million In Revenues
Embrace the identity crisis. Chances are you've already experimented with multiple product lines, price points and the like. But getting to $100 million means really having to think broadly about what businesses you're in--and be willing to cut loose underperforming lines and reinvest in stronger ones. "That's a big switch from early-stage companies, where it was about laser, single-minded focus," says Highland Capital's Maeder.
Tip No. 12: $25 Million To $100 Million
Ante up. Old-fashioned economies of scale (and lots of hard work) may have been enough to hoist you to double-digit revenues. To hit triple digits, chances are you're going to have to risk some serious capital--on equipment, real estate, marketing, whatever it takes. When Guernsey made the leap, he cringed at borrowing up to $8 million for extra storage space, delivery vans, tractor trailers and other distribution capabilities. "What I borrowed far exceeded my net worth," he admits. "It was scary, but we needed a new level of sophistication to serve larger customers in order to grow." Note: Scaring up that capital means having a clear vision for how you plan to put it to use; without that, don't bother asking. For more advice on how to communicate with investors, check out the 2008 Forbes.com Boost Your Business Contest.
Tip No. 13: $25 Million To $100 Million
Go public. The investment to get to $100 million in sales may be far greater than either the cash generated by your business or what your lenders are willing to put on the line. One solution: selling shares to the public. Such financing comes at a price, however, so think long and hard before you decide. For more on public offerings, see "Walk, Don't Run, To The Equity Markets", "Are You Ready To Go Public?" and "Financing A Small Business: Equity or Debt."
Tip No. 14: $25 Million To $100 Million
Get global. Few will argue that being able to compete these days requires an international strategy--and not just because of cheap labor in places like China, India and Vietnam. Emerging markets are also a wellspring of consumer demand. For more on the global economy, check out "Twenty Emerging Markets To Watch" and "How The World Spends Its Money."
Tip No.15: $25 Million To $100 Million
Take a hard look at management--again. Some people are start-up managers, others are later-stage managers and still others have the ability to think globally. By the time your company has reached $25 million in sales, it may be time to reevaluate the team. (That goes for your advisory board, too.)
http://www.forbes.com/2007/05/02/caliper-intuit-microsoft-ent-manage-cx_mc_0503growthtips.html
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