With very few exceptions, the answer to building a business that will last for a decade is the same for any medium business, whether it’s looking to cash out in 50 months or 50 years. It’s all about the structure of the business.
Many public companies operate shortsightedly, pumping up their quarterly numbers to boost their stock prices, with sometimes disastrous long-term results. A business with an owner who measures growth in years, not months, is a much easier ship to steer.
Follow this basic checklist to increase your chances of growing for years to come – assuming, of course, that people want the product you’re selling.
Establish strong financial controls.
Doing so produces solid information for decision-making and reduces the risk of theft and fraud. Put simply, until you know where every cent’s going, your business isn’t on a sound footing.
As a CFO, I’ve seen first-hand how an owner, freed from daily worries over cash flow, can successfully concentrate on the future – building relationships, developing new products and services and overseeing other big-picture issues. Hire trustworthy and smart people to handle the details.
Obvious? Yes, but never forget that a larger company is inherently less risky than a smaller one.
Diversify products and services.
Spreading sales over more customers, product lines or markets reduces risk and enhances opportunities for growth.
Streamline, codify and document processes.
The hallmark of strong companies is the quality, consistency and documentation of the way they operate. (This is the first step wannabe franchisors take to determine if their ideas can be replicated.) If you want to be a bigger company eventually, act like one now.
Since most businesses are valued by a multiple of their earnings, every rand of improvement here will result in more rands of value, whether it’s four years from now or 40.
Protect your intellectual property.
Make sure you have appropriate rights for your trademarks, names, designs, technologies, etc. Spending a few thousand rand on an IP attorney now can save millions – and headaches – later.
Maintain and improve property and equipment.
Maintain access to money that can be used for technological improvements, expand operations and keep everything in running order.
Reduce employee turnover.
Shelling out more money doesn’t necessarily create a loyal and productive work force. Respect, fair management and inclusion in decision-making go a long way.
Avoid competing on price.
A focus on undercutting the competition can start a vicious cycle that destroys your profit margins. You want customers to choose you for your superior products and services.