Planning for Growth: Set Your Company Up for Success

Is your accounting and finance function ready to support and help fuel your next phase of growth? To successfully guide your company to success, it is paramount to draw up a map. Put your critical systems in place before you need them – before you grow and your attention is needed elsewhere. It’s simple to focus on your core products, but travelling this road without navigation could lead to failure.

To give your company the best chance of success, here are seven guideposts to follow:

1. Org Chart

Often, early-stage companies pay limited attention to org charts. In a moment when nearly every employee is responsible for multiple functions and entirely focused on ensuring deliverables are completed on time, they can seem superfluous. For companies with small startup teams, they can seem pointless when reporting relationships and accountability are eminently clear because of the small size of the team.

Assuming that growth is in your plan, it’s critical to map this out. What will your organization look like one year from now? Three or five years from now? As your company scales up, how will your workforce scale, and in which areas? Taking the time for forward thinking about your personnel needs will help you determine who needs to get hired, when, and in what order. This means you can also include anticipated hires in your next year’s budget and three-year forecast.

As you consider your most important hires, give yourself the time to find the right people for the right jobs, because they will set the tone for the rest of your workforce. Talent breeds talent; good people want to work with – and for – other good people. As you are considering the structure of your company make sure you don’t just have the right job descriptions, but make sure you have the right people. And don’t forget that each of these hires is going to expect a competitive option grant, so make sure your option plan has sufficient shares in it to get these hires done efficiently.

2. Benefit Packages

Thoughtful benefit packages can be the deciding factor for a potential high value new employee. Today, there is high demand for excellent knowledge and innovation in industry workers; make sure that you are not only keeping pace with the industry on issues like healthcare and paid time off, but also try to position yourself as a leader in the space.

As your company scales and ramps up growth, you will be asking your employees to do more, to accept more responsibilities, and to be partners to you as you grow. By becoming a benefits leader, you will also be able to retain these same valuable employees. The post-pandemic economy has shown that it’s the quality-of-life issues, such as flexible work schedules and benefits, more than the salary, that keep employees checked in to companies even when the going gets tough.

3. Human Resource Policies

Effective human resource policies help employees see how their jobs and contributions fit into the larger structure of the organization and ensure clarity about requirements. The best of these processes help not only with professional development for employees, but also help the organization reach its goals.

As your headcount grows, it’s important to have a system in place to help manage not only the jobs, but the overall career paths of your employees. The current generation of workers has high expectations about feedback, promotion opportunities, and recognition, all of which require a more “high-touch” approach than the bootstrapping ethic of a young growing company. Putting these types of programs and processes in place while you are scaling quickly can be difficult; if it’s done poorly, they can cost you valuable people. To that end, it’s best to get these processes in place before you begin your hiring.

4. Scale: Don’t Grow Yourself Out Of Business

In the rush to succeed, take a moment to consider what success will really mean to your finances. For many companies, significant growth in a short time is a primary objective – but rapid growth can backfire without consideration of some unintended consequences. It really is possible to grow yourself out of business. Do you know what happens to your cost structure when you must reach 500 customers, rather than ten? What happens when you make the leap from $500,000 of revenue up to $5 million?

Consider which of your costs is fixed, and which will increase with revenue. Will your pricing need to change to reach the scale you’re seeking? Understanding how your key financial metrics scale as your business scales will help you avoid financial pitfalls. Be realistic. Embrace thoughtful scaling, not growth for the sake of growth – that is the key to success.

One frequent pitfall for entrepreneurs is management of their company’s working capital. Working capital is the difference between a company’s current assets – cash, accounts receivable, inventory, and so on – and its current liabilities, such as accounts payable, accrued expenses, and short-term debt.

To anticipate your working capital needs, consider your operating cycle. How long does it take you to produce your product or service? Are your costs primarily early in the process or later? How quickly do you need to pay your key vendors? How quickly will you get paid by your customers? Different business models have diverse working capital requirements, so it’s essential to understand the needs of your specific business.

If you undertake this analysis, you will be better positioned to determine what financing needs you’re going to have, and when. It will also tell you when non-dilutive debt financing for your working capital needs might be appropriate.

5. Expectation Management

In the rush to ensure that your customers are satisfied, and milestones are being met, make sure to manage expectations and communicate clearly with your investors and stakeholders. Keep them in the loop, and remember that investors don’t like surprises. Be clear and transparent, even when there is bad news – and there will be. Transparency means that you will build your financial partners’ confidence in you as an entrepreneur, a manager, and an allocator of their capital. This will allow you to avail yourself of their expertise if and when it becomes time to change the course of your business.

6. Are You In Good Hands? Don’t Forget About Insurance Coverage

As a growing company, it’s entirely possible that your business model, markets, and even products or services will change during the lifecycle of your company. As a result, the product or service you wind up with might not be the one that’s covered by your insurance. For example, if you start out developing technology with which you expect to sell a service but you end up selling the technology as a product, you may require an entirely different type of insurance than you started with. Make sure you are adequately and appropriately protected; even the best and most thoughtful growth strategy can be laid low by having inadequate insurance coverage in today’s cybersecurity landscape.

7. Have A Backup Plan

Growth almost always ensures that there will be bumps in the road. Knowing this and planning for the unexpected is important. Great entrepreneurs spend a lot more time planning for success than for failure, but it’s important to spend a little time developing a Plan B. For example, know what costs you can control on short notice with the least impact on your business. Have a plan for extending your financial runway so you have the maximum time to get your business back on track. Growth is never linear – it is quite common to have to pivot your business in a new direction on short notice. Having key contingency plans in place will help you respond quickly when the need arises.

How Can Wolf Help?

As we have outlined here, growing companies face challenges on many fronts. Working with the right team of advisors helps turn these challenges into opportunities and positions your company for continued and sustainable growth. Professionalize and invest in your accounting and finance function by working with CPAs experienced in working with dynamic and growing companies.

Wolf’s virtual CFO services can set your organization up for success. From financial planning to identifying opportunities for expansion, our Outsourced Accounting team tailors our industry-specific solutions to meet and exceed your goals, navigating your growth plan effectively.

If your organization is looking for assistance with your core accounting, compliance, or advisory needs, reach out to our Outsourced Accounting Solutions team. Our expert CPAs will ensure that you’re receiving custom-fit solutions that allow you to shift your focus away from the back office, and towards growth.