Businesses often have a life cycle similar to people. In my last post I described this life cycle and gave some tips on how to know if it’s time for your business to grow up from high-growth but awkward teenager to more stable adult.
Some teenagers never grow up. Uncle Rico is stuck in 1984 (although I heard the Broncos may be giving him a second chance…). But due to biology and societal expectations, most teenagers find their way into adulthood.
Businesses don’t have the same outside influences. It’s up to you to intentionally grow it up. Growing up often means turning some attention to the boring stuff you neglected while focusing on sales growth.
You know it’s time to grow up, but how do you do it?
You shouldn’t try to do it all yourself. In fact, you shouldn’t try to do much of it. But you need to make sure it’s getting done.
Task someone on your team who is capable of taking the lead, or hire someone to help. An experienced, full-time person might be expensive, but you can hire a consultant to whip you into shape and inexpensively monitor your business going forward.
Not that I’m biased, but an experienced, part-time CFO would often be a good choice for this role.
Here are some areas to consider.
Are you legally structured correctly? Are there things you can do to increase liability protection?
Would it be better to move real estate to a separate legal entity? Similarly, do you have unrelated business units that can be spun out separately? Structuring like this can prevent lawsuits against one part of your business from affecting other parts.
Unfortunately, lawsuits are a part of doing business. I don’t think I’ve been involved in a business that hasn’t been involved in some kind of lawsuit.
Have your auto, property, general/product liability, director/officer liability, workers compensation, and/or professional liability insurance policies kept up with your growth?
Are the limits and coverage adequate and correctly structured?
Hopefully you’ve been handling taxes correctly from the beginning, but part of growing up is making sure. Have an accountant review income tax, sales tax, payroll tax, and property tax filings and processes to make sure its all being done correctly.
When you’re not making much money, tax penalties and interest caused by mistakes may be minor, and you’re less likely to be audited. This changes as you grow.
Believe me, you don’t want to be audited before you’ve grown up.
Cleaning up your books is part of growing up. Can you rely on your books to make good, timely decisions?
If you don’t choose to clean up, you’ll eventually be forced to clean up by government agencies or capital sources like banks or investors.
Like many other messes in life, messy books are much less expensive to avoid than to clean up, so the earlier you grow up your accounting the better.
Startups usually hire based on desperation. Stuff to do is piling up, and they quickly throw bodies at the piles.
You need to be more intentional as you grow up, especially when you’ve grown past the point of being involved in every step of every hire. Those handling the hiring need to pay more attention to cultural fit, on-boarding, and a host of other HR and payroll issues.
This is not an exhaustive list, but it gives you an idea of things to think about as you try to grow up.
You or your person overseeing the growing up doesn’t need to be an expert in all of these areas, but they do need to know enough to communicate effectively with experts like outside attorneys, insurance brokers, tax accountants, etc.
Just a final thought. In this post I’m observing typical juvenile business behavior and giving advice on how to grow up. Typically, startups wait until after a period of high growth to start worry about these less exciting issues.
However, I’m not recommending they wait. As long as you don’t let it stifle your growth (and not have a business to grow up with), the sooner you grow up the smoother your growth will be. When it comes to legal, insurance, tax, accounting, and HR, an ounce of prevention is worth a pound of cure.
The trick is to prevent business-killing problems without preventing business-making growth.
Question: What other areas are involved in help a business grow up?