By Jonathon Drumm AFIML
Managing Director of Equity Partners, Jonathon Drumm AFIML shares his expert advice on how to survive the growth of your small business.
Running your own business (or planning to take the leap) is an exciting and unpredictable experience for any manager or leader. It can be like watching your children develop, with plenty of thrills, spills and growing pains. Here are some common growing pains many small businesses must navigate, along with some tips from my 20 years running my own businesses and operating as a private equity partner across Australia and New Zealand.
1. Know your basic numbers
A failure to understand cash flow, profit and loss, and your revenues is a common challenge for nascent business owners. Let’s assume you’re projecting $750,000 in turnover for your business, shared between three sales reps. You must determine whether each rep can produce $250,000 annually. If the answer is no, then your projections need a rework. If the answer is yes, how have you apportioned it? Have you thought about your Christmas/New Year shutdown? Staff holidays? Seasonal slowdowns? Public holidays? These events significantly affect your monthly and weekly cash flow. You must have dollars in the bank to cover these lean times.
To help with robust forecasting and projections, a good accountant with small-to-medium business experience will prove a savvy investment. That said, if you don’t have the basic numeracy skills, you must try and arm yourself with the financial knowledge to ensure you can understand and manage your outgoing expenses. Keep track of expenses and sales daily. Using a key dashboard with financials is critical. Apps such as Xero or ASB Plus are very useful and will display fluctuations, trends and anomalies for you to focus on.
2. Employ experienced staff
When you are in business for yourself, your time is the most precious commodity. A steep learning curve for a new inexperienced employee is not something a new SME owner can afford.
By employing experienced and proven staff (even if they are potentially more expensive) you are giving yourself back a huge amount of time that would otherwise have been spent in training and ‘hand-holding’.
Make sure you set clear targets and expectations for new employees and make these known right from the interview stage. Do not fall into the trap of being too timid in interviews, because you fear scaring away potential talent. It’s better to be upfront from the start.
3. Manage change
When businesses start to expand, the business reporting must change. Let’s assume your business grows quickly from five to 20+ staff members. Personal phonecalls with employees, or check-ins by the watercooler, will become less common.
Establish formal reporting structures to lead and manage sales, staff, or workload. This helps you identify what is coming in the door next week or next month. Consider implementing Customer Relationship Management (CRM) platforms such as Pipedrive or Salesforce, which is great for sales teams. For collaboration within teams you may need something such as Trello or Monday.com.
To get everyone onboard with new software, I recommend implementing these early on in the growth phase. Clearly explain to your staff the time savings and efficiencies that will be gained to ensure their buy-in.
4. Seek outside expertise before you need it
You might be an expert in your field, but owning a business can feel a bit like trying to be an expert in many fields. Be sure you have outside resources (that you have already vetted) who you can turn to for advice when obstacles arise. You can’t prepare for every eventuality, but you can line up your support systems early, to guide you when the going gets tough.
When you need help, do not be afraid to reach out to others for advice. Your support network might include paid specialist advisers as well as past colleagues or associates who know you personally.
Sometimes just talking through a challenge with a trusted friend will help give you the necessary clarity and objectivity to make the right decision for your business.