In working with privately-held small, medium, and large companies for more than two decades, I’ve found the best companies scaled their growth by focusing on four components: customers, capacity, cash, and control. Which of these will help you grow the most?
First, in my experience, successful companies always take care of their best customers and treat new customers better than their competitors. All customers are not equal.
When Steve and Alyssa McKenna launched Regina’s Luxury Granite, they already had many years of customer service experience in other businesses and it showed in their successful growth. In a competitive industry and slowing construction market, they’ve grown Luxury Granite into an industry leader with great customer service.
Their constant focus on personal customer service includes confidence that they can create a great kitchen for you at a great price, a positive attitude, quick production, and careful installation. At Luxury, their positive and proactive approach to helping their customers has driven their growth.
Second, growing companies constantly ramp up, accelerate, or expand their capacity so they can take on more and larger orders. Planning for growth can avoid lots of growing pains.
As obstetricians and gynecologists, and friends since medical school, Dr. Erin Kot and Dr. Jackie Ferguson wanted to create an accessible and responsive medical clinic to serve women’s needs. They help women before, during, and after childbirth, as well as provide gynecological health care for women of all ages. Their dreams have recently become a reality when they opened their new clinic, Maternity and Wellness on Victoria in Regina.
With the help of PCL Construction, Doctors Kot and Ferguson designed and built their ideal facility that focused on patient comfort and convenience while maximizing doctor accessibility and productivity.
Their clinic was built to scale up for growth from day one. They’ve got the space and the systems to add more doctors and other health care providers, extend their hours, and utilize the facility to best serve more patients. They planned for the future.
Third, high growth companies manage and juggle cash to make sure they are meeting their obligations and building trust with suppliers and bankers. Cash is the fuel for growth…and trust.
I’ve heard lots of people say cash is king. It’s not. It’s the ace.
Every entrepreneur knows they can run out of cash much more quickly than they run out of profit, which is an accounting concept. Therefore, relying solely on your monthly income statements can be very dangerous.
Another danger sign is minimizing taxes instead of focusing on maximizing profitable growth. Minimizing taxes is a terrible growth strategy that weakens your balance sheet, which reduces your borrowing power, which reduces your fuel for growth. Paying tax and leaving money in your business—that you borrow against for working capital—can generate over a 1,000% ROI.
Knowing your total days to cash, from when you pay your employees and overheads, until you finally collect from your customer, is crucial. This number is likely larger than you think, and that leads to slow receivables and slower payments to suppliers.
The best companies I’ve worked with know their weekly or daily cash position and constantly hustle to increase cash inflow.
Finally, companies that want to scale quickly create information and systems to give them real-time control over the entire business.
Control comes from knowing your sales pipeline, production volumes, and cash position. The best information to control your business includes booked sales orders, daily production volume, and cash flow. This is about real-time information, not about historical financial statements.
I advise all my clients to create a weekly flash report that tracks sales, production, and cash. The faster you can turn this wheel—from orders to production to payment—the more cash you will generate and the more you will grow.
In conclusion, scaling for growth is intentional and strategic: take care of your best customers, increase your capacity in cost effective ways, ruthlessly manage your cash, and control your entire business in real time. Full speed ahead!
Phil Symchych CPA, CA, MBA is the president of SME Business Wealth Builder Corporation and helps privately-held companies to increase their revenues, profits, and valuation. He can be reached at 306-992-6177 or Phil@SMEWealthBuilder.com.