Avoid These 5 Mistakes Most Firms Make in Business Growth!

Avoid these 5 mistakes most firms make in business growth!

Written by Chetan Dogra, CPA

In terms of business growth, your company is currently expanding like a plant. The future is beginning to take on a clearer appearance now that those trying first few years are behind you. You have a workforce with well-defined responsibilities, and you are finally starting to make some money.

You’re searching for chances to grow your company into new markets or additional service offerings. You are beginning to use financing from bank lenders or investors because these opportunities demand capital expenditures that exceed your company’s existing resources.

Additional, more specialized internal resources are needed due to the complexity of accounting (a controller, a CFO, someone to handle accounts payable and receivable, etc.). A review or even an statutory audit may be required by invested parties.

Typical Errors & Pitfalls in Business Growth

1. No clear vision

Of course, failing to have a clear vision for what the company will look like in the future is one of the most frequent blunders made throughout the growth phase.

2. Trying to grow quickly

Trying to develop too quickly is one of the mistakes that growing businesses make most frequently. They overestimate their ability to service their debt by making too optimistic volume predictions. To finance the operational requirements of expansion, cash must be realistically allocated, and a balance must be established.

3. Poor choice for funds usage due to overestimating resources

Owners who overestimate their financial resources may make poor choices, such as using company funds to support their personal lifestyle. Setting this precedent is not a good idea, particularly for owners who want to sell the business.

4. Insufficient understanding of business health due to inadequate accounting systems

Due to inadequate accounting assistance or information systems, business owners frequently lack the knowledge necessary to understand the true financial health of their company. Similar to how children outgrow their clothes, a growing company requires the proper level and type of accounting help.

The individual who managed the accounting department for a $10 million organization may not be the same bookkeeper who kept your books in order when your business was just starting out. How will you go where you need to go if your accounting department isn’t equipped to identify possible problem areas and business opportunities early?

5. No succession planning

Though succession planning may not come to mind when your business is growing, it is very important to consider. Will you pass the company on to a relative or a key employee? Will you prepare it for sale to a private equity firm or third party? Business owners who don’t think deeply about these important issues may be passing up chances to make adjustments that would better position their company to reach their desired objectives.

The key to overcoming these errors is to be mindful of certain factors. What are they? We will explore them in our next blog Best Accounting Services Tips for Business Growth.