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Why Entrepreneurs’ Dream of Hypergrowth Fast Becomes A Nightmare

Rapid growth is the stuff most entrepreneurs dream about as they take their fledgling company through the early years but when it happens, it can quickly become the stuff of nightmares.

The bubbles in the celebratory champagne—“Here’s to our success!”—barely have time to go flat before the problems arise across the high-impact growth or Scale Up business.

Suddenly owners are beset by problems involving the people they’ve hired or not hired, their cashflow chokes, and processes that once worked so smoothly groan to a halt. Customers then leave snide reviews because products or services aren’t delivered on time, and key suppliers get angry at delayed payments. Bankers who were once so keen for business begin to crank up the pressure as overdrafts or loans get close to the ‘red zone’.

No wonder then that so many business owners spend hours every night staring into the darkness wondering what on earth happened to their once easy-to-manage business.

The owners of high impact growth or Scaled Up businesses are often the loneliest, most isolated and overworked individuals. While start-up owners get an avalanche of government help and assistance, their Scaled Up counterparts get very little attention or assistance.

The CFO Centre’s Chairman Colin Mills says he’s seen first-hand what pressure does to business owners.

“I’ve sat in sales meetings with entrepreneurs who had literally been brought to tears by stress and frustration and the feeling that it’s all too much.”

It’s for this reason that Colin has written Scale Up: How to Take Your Business to the Next Level Without Losing Control and Running Out of Cash.

It’s aimed at the owners of companies facing or already experiencing the problems of scaling their businesses to ensure they minimise the problems and achieve growth in a controlled, sustained way.

“Our experience suggests that scaleup issues start to bite at about £1M/$1M Sales Revenue or a minimum of 10 employees,” he explains.

“By the time a business reaches £50M/$50M Sales Revenue or 250 employees (larger firms tend to have fewer employees per £/$ of Sales Revenue) they can most often be considered a “scaler”: they are past the main dangers of scaleup.”

In his book, Colin explains why scaling a business can be so problematic. The business owner has to deal with one or even all of the following:

  • People challenges
  • Sales and marketing challenges
  • Operational challenges
  • Administrative challenges
  • Financial challenges

Colin explains, “Businesses run the gauntlet of increasingly severe challenges, mostly because they are growing but don’t have the necessary infrastructure to support their expanded operations.

“While on paper, they may have the revenue, the manufacturing base or customer reach of a substantial business, the culture, the controls, the processes, the personnel and the leadership remain those of a much smaller business that they were a short time before.

“Worse, they haven’t yet accumulated the resources to build and maintain that infrastructure.”

This creates a hazardous situation for the business, he says.

“The biggest danger in this period is that the business will either outrun itself or get stuck, like a deer in headlights. Outrun, as the company spirals out of control and its cash reserves dwindle trying to meet the expanded demands of the business.

“Or stuck, as the entrepreneur tries to cope with everything at once, frustrated that the problems he could happily once deal with—back when the business was smaller—are not being dealt with by the people he is employing, often at substantial cost.”

Overcoming such problems or avoiding them is only possible if you revise your business model.

“You need to consider your whole business model, because if you have a terrible business model, then the last thing you want to do is to start scaling it. If you do that, then all the small problems that make your life a nightmare now will become major headaches.

“If your business model isn’t great, however, it doesn’t mean that all is lost: there’s a lot you can do to retrofit, design and redesign a business.”

Besides explaining the challenges scaling businesses face, Colin also provides the methods you need to use to overcome them—the same methods that the CFOs from the CFO Centre offers its clients.

They’re also the methods the CFO Centre has used in its own scaling up process, says Colin.

The CFO Centre is a scaleup that has been growing at over 30% for the last three years with close on 400 CFOs but Colin admits he keeps a keen focus on the business, the business model and the key performance indicators.

“It might be a scaleup now, but that doesn’t mean to say it’s not going to career out of control. I have to keep my eyes on the business, re-evaluate the business model, watch the indicators.”

Along with practical advice that you can use immediately, the book features an array of case studies in which business owners describe how they overcame the challenges of scaling their businesses.

So, if your business is on the verge of or already experiencing the ‘difficult teenage’ phase and you’re wondering how to overcome the nightmare challenges you’re facing, this book is for you.

It’s available on Amazon as a paperback and Kindle ebook here.

And to discover how The CFO Centre will help your company to scale up, please call us on 91 9967531075 / 9867916753 or contact us here.

How to Seduce Your Bank Manager

Given that the bankers are often ranked in the top 10 of the world’s most hated professions, the prospect of seducing your bank manager is probably not high on your bucket list.

It’s fair to say that you’ve probably never thought about doing it. But if you want your company to grow then it’s something you not only need to think about but act on.

Unfortunately, seduction, in this case, will rely almost entirely on the allure of your company’s numbers rather than your ability to deliver snappy one-liners, a bunch of hothouse flowers or the promise of a candle-lit dinner. That’s because the average bank manager is a risk-averse creature who will demand far more from you than the average romantic date!

And it will be down to you to do the running—because if you need to fund your working capital or if you’re looking to fund investment in the business and to grab an opportunity, you’re likely to need external funding.

In other words, you need your bank manager far more than he or she needs you. That’s because access to finance will be a key determinant in your company’s growth and if you’re like the vast majority of SMEs, you’ll approach traditional banks for funding (in the form of an overdraft or loan) before looking at other funding options. So you’ve got to be at your persuasive, most charming best.

And it will take preparation—masses of it. Think weeks, even months of preparation.

That new finance might be for working capital/cash flow or capital expenditure such as investing in new machinery or property or improving existing buildings. Or you might need it to enter new markets, develop new products/service or even to refinance the business.

Whatever your reasons for seeking external finance, if you’re going to approach a bank, you need to know the best ways to win over your bank manager. You also need to know what approach is going to trigger an immediate slap-down (an outright ‘No’) or the offer of a substantially smaller amount than you’ve requested. To download our full report on how to get the best out of the relationship with your bank manager click here

Why do bank managers rebuff applications?

Banks won’t always provide you with the reasons they’ve turned down your loan or overdraft application. But here are some of the reasons they’ve offered companies in the past few years:

  • The company is experiencing declining sales/profitability
  • The company is over-leveraged
  • The bank has changed its lending policy. A new feature of the new ‘normal’ financial environment means there’s been a reduction in the availability of longer-term debt (for loans with terms stretching over five years), according to the CBI.
  • The company has insufficient security
  • The company has no experience in the new product/service or market
  • The bank considers the company’s business sector or trading environment too risky
  • The bank is not prepared to lend the full amount
  • The company has a weak balance sheet.

How to boost your chances of a ‘Yes’ response

So how do you get your risk-averse bank manager to happily rubber-stamp your loan or overdraft application?

Be prepared

Your bank manager is likely to demand you provide fully audited accounts, financial cash-flow projections, security information and guarantees and full business plan details. You might also be asked to provide evidence from order books.

Companies who’ve gone through the application process in the post-recession years have noticed that it’s become a lot more stringent. They found there was a higher level of due diligence, sales and market reporting, security and guarantees and that the process took longer than was expected. This was particularly the case when they approached banks with which they’d had no previous dealings.

Improve your credit rating

As well as having all the required paperwork in place, managing and making efforts to improve your company’s credit rating will help your chances of getting a ‘Yes’ response from your bank manager.

That means making payments on time, maintaining regular contact with creditors and banks and ensuring you offer maximum financial transparency.

Enhance your internal resources

Hire an experienced Chief Financial Officer who has experience with accessing various forms of bank debt finance and can put together, for now, the business plans and financial projections the bank will want to see. Here’s the thing: you can now hire a part-time highly experienced Chief Financial Officer for less than you’d pay a full-time junior staff member. You can find out more here

 

Conclusion

Seducing your bank manager is going to take time and lots of effort but if you’re successful, it will provide your company with the financial fuel it needs to grow and reach its full potential. 

 

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