What to expect as your company grows
Businesses have five growth cycles and that is what is to be expected. As seasoned as I am in business, sometimes my tummy starts to churn when I encounter new things I have never dealt with before in my business. I have to remind myself that uneasy feeling is usually just a sign of my business transitioning to the next business growth cycle.
The next time you come across a tummy ache while dealing with your business, remember to ask yourself if you are having growing pains. Growing pains are actually signs that your business is healthy. But just like anything else, you will want to manage the pain by knowing where you are in the business growth cycle. I have a very low tolerance for pain so I am all about business management as. If you are aware of what grow cycle you are in you can minimize the pain.
The start of up phase is the first cycle of business is where you got some hair brain idea to give up the 9-to5 job and to go out on your own with the skills you are the most confident using. You are now a solo-prenuer and are very busy wearing multiple hats in your business. You are the owner, the receptionist, the sales person, the service person, the marketer and the internal accountant. Yes, the accountant. You will want to open a separate business account for only business income and to manage business expenses. Anytime you need personal funds transfer funds from your business account to your personal account so you can have money to pay your personal expenses. Do not comingle funds and pay personal expenses from your business account.
On boarding assistants in your business is the second stage of business. All of sudden you wake up one day and show up at a clients office for a meeting that was two days ago and you instantly get that overwhelming feeling that you can no longer manage this business on your own. You are asking yourself is it time to hire an employee or get a contract worker to help me for a few hours a day. In order to be on track you will need to understand the difference between an employee versus an independent contract worker. Don’t get caught in the independent contractor trap as everyone is an employee unless they have their own business. If you choose to hire employees, you will now have payroll and payroll tax requirements at least on a monthly basis.
Onboarding skilled workers who possess some or not all the technical skills you have is probably the business growth phase in your business. Now you can increase the production output of your business because you have other individuals who do what you do. Wait a minute, you thought they could do what you do and you are suddenly realizing they don’t do it exactly as you do it but you need them to meet the delivery deadlines. This is a very important phase in your business as this is where you begin putting together systems and process. Making sure they know what is expected from their output. You have now retained skilled workers and keeping them will require more than just a salary. You will need to look into offering benefits such as medical insurance and other intangible benefits to retain the employees. Understanding what benefits are pretax and taxable is crucial at this stage.
Having your business make money whether you are there or not is another major growth stage in business. Very important. This is the business growth cycle that is the dream for a business owner. You can step out of the business, take a vacation or leave for an indefinite period of time knowing t the business is still operating and making money. This is a critical stage in business and if not managed well can turn a great business into a not so great business.
Having an accounting system with clear checks and balances and a third party firm over seeing this management is crucial. The proper accounting protocols and managing your business buy the numbers is essential. At this stage, most businesses have an internal accountant. Having an accounting firm review what the internal accountant is doing monthly will guarantee the numbers are being properly accounted and variances are being reviewed with a keen eye. By my being an accountant I assume the role of over seeing my numbers. I can tell instantly when something is not quite right. You will grow into having a gut feeling about your numbers in your business over time.
The legacy transition is the fifth stage of business and is where all your hard work pays off. It is at this stage in your business where you are planning your exit strategy. Some of you may think you will never quit working. I, like you, love what I do but at some point I will scale back or come in only one or two days a week. At the end of the day, we all will make a decision on what we want that legacy transition to be.
You will want to have options and a well maintained business with good solid accounting records and consistent growth will have these options. It maybe you plan to sell your business, have your family take over your business, merge your business, do an initial public offering or just plain quit. Either way you will have some major tax and accounting implications. If done right, you can step out of your business with a nice nest ache. The key is being aware of the business cycle and seeking strategic advice before you make any decisions.