Business ownership: A focus on growth
ARTICLE | February 08, 2023
Authored by RSM US LLP
A focus on growth
This is probably the most thrilling and daunting stage you’ve encountered yet. You’re running on all cylinders now, investing on fronts like the sales process, manufacturing and production, and scalability. The business has reached a point where it cannot operate without structure, process, and expertise. Below, find answers to common questions business owners ask in the growth stage.
Questions and answers:
Q: What is my growth strategy?
Most organizations rely on a mix of organic growth and growth by acquisition. It’s important to formulate and evaluate a strategy and stick with it. Don’t chase value for value’s sake. If organic growth is your route, an investment in data analysis may pay off in the long run. If acquiring, realize that each acquisition will require due diligence and integration. Rapid expansion requires analysis to ensure that it is a profitable expansion. Always be open to where you might make changes to capture value.
Q: Do I have an airtight leadership strategy and succession plan?
No business owner can be an expert at everything, and, at this point in your company trajectory, tap specific individuals to take on leadership roles across the enterprise that dovetail with their skills and passions to ensure a solid management structure. Also, be open to bringing in outside advisors to evaluate your team’s ability to take the organization to the next level if you were gone.
Value is based on an organization’s ability to create additional profits after key leaders exit, which is why succession and contingency planning are important.
Q: Is now the time to consider outsourcing key department responsibilities?
While you may have had success up to this point tapping in-house talent to cover basic functions, you might now benefit, for example, from a more sophisticated finance and accounting skill set. Such a team can run complicated projections and ROI analysis for a possible new market penetration, produce detailed budgets and analyze forward-looking business intelligence. Consider outsourcing to derive better strategic value from specific, important departmental functions.
Q: Do I understand the changing regulatory footprint?
Each new customer can create new regulatory or compliance exposure. As your company grows these changes can be rapid, and if left unchecked can lead to pain and financial loss. Make sure that your growth plan includes evaluation of new markets so you understand your exposure, the true profitability of these transactions, and are ahead of regulatory requirements. Planning will help you avoid unpleasant surprises.
Q: Is my entity type still optimal?
Although you began thinking about what company entity type works best for your business at startup, and likely cemented your type during launch, entity becomes critical during the growth phase when many companies see their first profit. That coupled with the need for investment dollars and increased regulatory complexity may necessitate a shift in structure priorities. And it will need to be revisited again, since goals and laws continue to change. Entity type is one of those evergreen issues that should always be dancing at the edge of your consciousness.
Best practices for owners of growth stage businesses
People, process, and technology
Focus on these important details
Pay attention to state tax liabilities:Things are happening quickly. Paying attention to new state tax liabilities can be key to controlling your regulatory and tax footprint.
Increase ROI of your investment: If you’re planning to grow inorganically, thinking strategically can help to increase the ROI from your investment. Structure, placement and existing risks all enter into these decisions.
How do entrepreneurs address the various lifecycle stages of business ownership?
Owning a business takes a certain confidence and grit. All owners are different, but all face similar challenges. Our business ownership lifecycle ebook shares insights gleaned from helping business owners face these challenges head on.
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This article was written by RSM US LLP and originally appeared on 2023-02-08.
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