The Next Step: Preparing for Growth
- Keywords:
- growth
- talent
- the next step
At some point the time comes when every business owner asks, what's next? It's a natural part of the success of your company. But to move toward the next step you first need to understand where you are, what taking that step requires, and what it really means for you, your business, and even your family.
It's difficult to consider your strategic alternatives unless you know where you are in the lifecycle of your business. That is, understanding whether you’re focused on growing your business, considering exiting the business, or somewhere in between. Taking the next step likely involves moving closer to one end of that continuum and being honest about how each alternative brings the most value to your shareholders.
In either case, your short-, medium-, and long-term goals depend heavily on your position on this spectrum. But let's face it: you spend so much of your time focusing on the day-to-day aspects of your business that it can be difficult to think strategically about exactly what comes next.
Ready, Set, Grow
Let's focus on the growth end of the continuum, where you can begin with asking two essential questions:
- Where do you see growth coming from?
- Do you have the right resources in place to achieve your growth plans?
Even when you've determined that you want to grow, you have to figure out exactly what that looks like. Is it a geographical expansion? Is a merger or acquisition an option for you? Would vertical integration with a customer or supplier be the right option?
Each of these decisions comes with its own set of considerations. Does expansion require additional capital? How do you properly assess potential locations or acquisition targets? How long will your payback period be and what kind of return will the investment yield?
Leverage Your Network
Any growth plan means assessing the opportunities and the risks, and that often requires seeking input from your network of peers and advisers. Internal and external partners such as your accountant, attorney or banker can help with introductions to potential customers, as well as provide expert guidance.
Sometimes it’s helpful to seek out voices outside your current network as they can give you a perspective you hadn’t previously considered. Attending industry events or getting involved with college alumni groups can also help in this regard.
In many cases, establishing an external board of advisers can be beneficial. Along with providing connections that can help you expand into new markets, their job is to help you make the right decisions for the business.
Take the case of a food manufacturer that’s looking for capital sources to finance growth in the short term. An independent board can be a great asset
“Sometimes it’s difficult when people work for you to tell you what they’re thinking,” a company executive says. “An independent board that doesn’t have a stake in the game is more apt to tell you things you don’t want to hear.”
The company executive says he’d like a board composed of individuals from diverse business backgrounds to help with their strategic direction, including other ways the company can change its focus to meet new competitive realities.
Often, that means being willing to disrupt the status quo. We've seen many cases where businesses have been unwilling to change, especially when it's a product or service the owner is passionate about. But you have to be willing to answer tough questions such as: How much growth are you sacrificing to keep legacy structures in place, whether it's a product line or a corporate division? Could you be allocating your funds more responsibly?
When you're looking to grow, you can't afford any sacred cows. You have to look at every aspect of your operation with a critical eye. A board of advisers—especially if it’s made up of individuals willing to challenge the status quo, not just “yes men”—can help you make those assessments.
“If you get a homogenous group you’re just going to get the same answers, so you want some different viewpoints,” the company exec says. “You definitely want people who have run businesses, because they know how important it is to deal with people. We would want food industry people who understand markets and trends. We would want people who understand what it takes in terms of capital to support growth. And we’d want people who understand how to hire and retain top management.”
Getting the right kind of growth is a process, one that will likely be filled with fits and starts. Once you start the process, it can take years to get to the next level.
Ultimately, growing companies should set clear goals around defining success and ensuring that growth is creating value for the shareholders. Getting the right kind of growth is a process, one that will likely be filled with fits and starts. Once you start the process, it can take years to get to the next level.
And even if you know what your ultimate goal is, you’ll have to be nimble enough to capitalize on opportunities and make adjustments when you come across challenges. The key is to keep your eye on creating long term value even as you're managing the day-to-day task of running your business.
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Henry Munez
Henry Munez currently serves as Market Executive and Head of Diversified Industries Group of Illinois. He leads a team of bankers, covering middle market companies and private equity firms in the Midwest. In addition to his team's new business focus, Henry is responsible for the overall risk management and profitability of the team's growing client base. Prior to jo…
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At some point the time comes when every business owner asks, what's next? It's a natural part of the success of your company. But to move toward the next step you first need to understand where you are, what taking that step requires, and what it really means for you, your business, and even your family.
It's difficult to consider your strategic alternatives unless you know where you are in the lifecycle of your business. That is, understanding whether you’re focused on growing your business, considering exiting the business, or somewhere in between. Taking the next step likely involves moving closer to one end of that continuum and being honest about how each alternative brings the most value to your shareholders.
In either case, your short-, medium-, and long-term goals depend heavily on your position on this spectrum. But let's face it: you spend so much of your time focusing on the day-to-day aspects of your business that it can be difficult to think strategically about exactly what comes next.
Ready, Set, Grow
Let's focus on the growth end of the continuum, where you can begin with asking two essential questions:
- Where do you see growth coming from?
- Do you have the right resources in place to achieve your growth plans?
Even when you've determined that you want to grow, you have to figure out exactly what that looks like. Is it a geographical expansion? Is a merger or acquisition an option for you? Would vertical integration with a customer or supplier be the right option?
Each of these decisions comes with its own set of considerations. Does expansion require additional capital? How do you properly assess potential locations or acquisition targets? How long will your payback period be and what kind of return will the investment yield?
Leverage Your Network
Any growth plan means assessing the opportunities and the risks, and that often requires seeking input from your network of peers and advisers. Internal and external partners such as your accountant, attorney or banker can help with introductions to potential customers, as well as provide expert guidance.
Sometimes it’s helpful to seek out voices outside your current network as they can give you a perspective you hadn’t previously considered. Attending industry events or getting involved with college alumni groups can also help in this regard.
In many cases, establishing an external board of advisers can be beneficial. Along with providing connections that can help you expand into new markets, their job is to help you make the right decisions for the business.
Take the case of a food manufacturer that’s looking for capital sources to finance growth in the short term. An independent board can be a great asset
“Sometimes it’s difficult when people work for you to tell you what they’re thinking,” a company executive says. “An independent board that doesn’t have a stake in the game is more apt to tell you things you don’t want to hear.”
The company executive says he’d like a board composed of individuals from diverse business backgrounds to help with their strategic direction, including other ways the company can change its focus to meet new competitive realities.
Often, that means being willing to disrupt the status quo. We've seen many cases where businesses have been unwilling to change, especially when it's a product or service the owner is passionate about. But you have to be willing to answer tough questions such as: How much growth are you sacrificing to keep legacy structures in place, whether it's a product line or a corporate division? Could you be allocating your funds more responsibly?
When you're looking to grow, you can't afford any sacred cows. You have to look at every aspect of your operation with a critical eye. A board of advisers—especially if it’s made up of individuals willing to challenge the status quo, not just “yes men”—can help you make those assessments.
“If you get a homogenous group you’re just going to get the same answers, so you want some different viewpoints,” the company exec says. “You definitely want people who have run businesses, because they know how important it is to deal with people. We would want food industry people who understand markets and trends. We would want people who understand what it takes in terms of capital to support growth. And we’d want people who understand how to hire and retain top management.”
Getting the right kind of growth is a process, one that will likely be filled with fits and starts. Once you start the process, it can take years to get to the next level.
Ultimately, growing companies should set clear goals around defining success and ensuring that growth is creating value for the shareholders. Getting the right kind of growth is a process, one that will likely be filled with fits and starts. Once you start the process, it can take years to get to the next level.
And even if you know what your ultimate goal is, you’ll have to be nimble enough to capitalize on opportunities and make adjustments when you come across challenges. The key is to keep your eye on creating long term value even as you're managing the day-to-day task of running your business.
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