In the fourth post of our Q&A series with our Co-Founder Susan Richards, FCPA, FCMA, we asked her about what business owners should be focused on when looking at company growth.
What are 3 tips you would give to a business owner that is focused on growth? Growing a business is not as easy as one might think. Specific tips would depend on each company's industry, structure and business model. Having said that - here are 3 generic tips that every business owner should consider before growing their business.
1. Get profitable first. We live in a world of debt and as a result many business owners run their businesses on cash and credit with little consideration of profitability. The first target should be EBITDA positive and then growth.
2. Set realistic growth targets. As Bill Gates has famously said, "Most people overestimate what they can do in 1 year but underestimate what they can do in 10 years". Set a realistic 3-5 year revenue targets and work backwards to determine milestones along the way. You really need to nail down the targets in order to plan out the associated spend that will get you there. With those targets and assumptions a virtualController or virtualCFO can numerate your financial and cashflow plan so you'll know how much cash you'll need to reach your goals.
3. Meet with your banker now. One of the most common mistakes is waiting until you need cash to talk to your banker. Financial institutional representatives commonly say 'we don't fund losses'. For many business models this means that any growth expenditures (like increased headcount with delayed revenue impact) are going to impede your ability to increase lines of credit if you didn't first approach the bank with your financial plan so they can get on board with you.