As a qualified accountant I’m often asked how to grow a business.
There are lots of get rich quick schemes out there but for a organisation to that wants to grow and thrive while there aren’t any easy fixes there are ways of boosting your chances of success.
However I can share with you the steps that as a management accountant I recommend, based on a 5 step course that Lyndsay Henderson and I have created.
Accountancy techniques may not usually be seen as setting the world on fire but if they mean you can double your turnover and triple your profit or surplus that surely is worth thinking about.
The following are the five steps we’d encourage all organisations that want to grow to take:
Step 1 – Know your numbers and your goal
I often talk to people who are interested in growing their organisation – whether to serve more people as a charity, to make a bigger difference as a social enterprise or to scale up their business. It’s really tempting to answer the question ‘how big do you want to be?’ with ‘as big as possible’ but actually it’s really important to know what your turnover costs and margin are now and to quantify how big you’d like to get to in what timescale. For example Holy Brook Associates exists for more reasons than just to make a profit, so while growth matters to us – it means we are making a bigger difference – I am willing to sacrifice some growth to ensure we meet our social goals.
Step 2 – Explore your revenue
Understanding the different sources of income for your organisation is crucial – which areas give you a good return, which do you think will increase, which remain similar – and are there any areas you think will reduce or even stop.
Step 3 – Managing your costs
Knowing where the money goes is vital as is understanding how they will change as your business grows. Some costs may remain the same, some will increase as you increase your output, others will grow in steps or jumps. Other costs you may not even recognise might appear as you grow – for example a large organisation may require more management, which if you as a founder are providing may not appear in your accounts as a cost – you’re likely to be putting in a lot of time that a manager might expect to be paid for.
Step 4 – Cash matters
Cash flow is really crucial – businesses and charities generally don’t fail because they aren’t covering their costs on paper, but because they run out of cash in the bank. This is particularly vital as you grow a business as you may have to invest in more equipment, staff or inventory before you see money coming in. We’d encourage you to keep a very close eye on your cash flow and the forecast for this, and take action as you spot potential issues – rather than waiting for them to arise.
Step 5 – Really unlocking growth
The final step we’d recommend is to understand what your key resource is and find ways to maximise its use. This is whatever it is that if you had more of it you could grow faster. Once you’ve identified that you need to maximise the use of it. For many small organisations this is actually the time of the founder, chief executive or even the chair of trustees. If that’s the case you need to look at how you free up time from less important tasks, tasks that can be delegated and you may need to look at recruiting or paying for skills that help you be more effective.
I’d be fascinated to hear from you if you have been thinking about growth and whether you’ve taken any of these steps. Do get in touch – if you’d like more help you can join our community for FREE resources and templates