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There comes a time in the life of a growing business when you, as its founder and top manager, realize the company has taken on a momentum of its own. You influence it, certainly, but more and more you are swept by it.” – John Peterman Before looking at how an entrepreneur manages a growing business, it is first important to understand that as companies mature, they go through different stages and that in each stage,the entrepreneur will experience different problems. Thus an entrepreneur MUST be ready with the proper knowledge and skills to address these problems. The growing stage of an entrepreneurial firm may be divided into two. These are the early and later growth stages. In the early stage, the business may have a tendency to over-commit its capabilities because it is sales driven as opposed to being profitable. In the later stage, the company becomes more focused creating its own vision of the future where emphasis is on profitability of each endeavor and not simply closing sales. To address these challenges, an entrepreneur must be aware of how to manage the growth without being entrenched in the workload that he has been accustomed to during the startup. Financial resources may also have to be reviewed as previous structures may not be able to cope with expansion demands. And as changes are continually being implemented, the entrepreneur must be able to monitor the improvements and downfalls of the new direction the organization is going through. Thus, during these crucial stages, an entrepreneur must focus his attention on the following three aspects of his business: People Controls Financing People During the early stages of an entrepreneurial firm, the business will need members that are compassionate to the growth of the business. A lot of flexibility will be needed as adjustments will have to be made. The people needed may not necessarily have high level competencies for certain skills but must definitely have the drive to push performance to a higher level. At this stage, hard work counts for more than experience. As the business grows, there will be a need for more specialized skills and possibly more competent members. An entrepreneur may look within his organization and promote high performing members or he may opt to look for those who can “hit the road running”. To promote from within though will mean greater expectations from its members to be able to “run” along more seasoned competitors and the speed of growth of the business. Cause and Effect What can we expect from this situation? If an entrepreneur decides to stay “loyal” to the employees that dedicated much of their time and effort to the success of the business, knowing that these current employees may not possess the competencies needed to address the business growth, then he will definitely have a cohesive yet inadequate team that may even lead to the downfall of the business later on. If the entrepreneur decides to replace or promote an “outsider”, he may create a very competent team but de-motivate key member of his existing team and create a dysfunctional culture within his firm. In this stage, he has to make firm decisions and COMMUNICATE the reasons to manage performance of the people, success of their endeavors and the culture within his organization. Controls As more and more activities are going on in the organization (this is actually a good thing), monitoring the implementation and successes may increasingly get more difficult. The entrepreneur must then implement control measures to monitor these activities. The following are examples of control systems needed: Institute and continually assess accounts receivable and collection policies Develop an inventory systemthat minimizes the risk of both stock outs and overstock Establish a payables policy that balances desire to pay as late as possible with the need to maintain relationships with vendors through on-time payments Determine effectiveness of expenditures Use metrics to track trends in receivables, inventory, payables, and financial performance. The control of accounts receivables is a very important aspect of the business that may be overlooked as it grows. To ensure proper control, an accounts receivable policy should include: When communication is made relative to account balances or payment reminders When/how contact is made for past due accounts When/how collection efforts are undertaken Controls are not only limited to that of payment terms. Effective control measures must also be implemented on cost management to detect inefficiencies and trends on how receivables, inventory and payables rotate. An entrepreneur must look at how long it takes to collect receivables relative to the amount of inventory needed to be purchased and the schedule of payments that need to be made. As costs are being monitored, an entrepreneur will notice the need to also monitor the efficiency of its operational activities. He will notice that his costs are greatly affected by the performance of his sales, marketing and administrative strategies. Thus monitoring these activities also becomes a necessity. Financing The key to managing growth lies in how an entrepreneur maintains his finances! A growing company needs cash to maintain its current activities, address its current growth and to prepare for its long term expansion. There are various ways an entrepreneur may prepare for these but ultimately, the goal is to find a way to provide the needed finances to address them. Growing companies should find ways not only to increase sales but to increase margins per sale. Its goal is to minimize external finances and be able to finance its own activities. The following are examples of how to improve financing for growing businesses: Outsource backend processes and focus on key processes Reduce inventory levels to a minimum Lease out underutilized assets Place cash into short term generating investments Shorten operating cash cycles