Welcome to the final part of our entrepreneurship endeavors series, dedicated to helping New Orleans & Louisiana entrepreneurs make sense of their financials as they grow their business from launch. If you missed any of the first three parts, make sure you learn about starting your business, your first week, and your first taxes before continuing on!
If you’ve come this far, you’ve got a fortunate problem on your hands.
Most new businesses close within five years of operation. It is a risk that comes with the territory, but it may arrive as a shock nonetheless. Managing a business takes hard work, determination and a little bit of luck. Everyone has a grand idea when they open a business. Our first three weeks covered how to turn that idea into reality. This fourth and final article will discuss how to turn that reality into your dream.
Once you get over the hump of living paycheck to paycheck and wondering whether your business will survive, you should figure out how to properly scale. Though there’s nothing wrong with having a small mom and pop business, most businesses don’t make a serious profit until they have several employees and more than one location. Obviously, every company is different, but scaling is a logical step for anyone.
The idea of scaling can only go so far, though. Putting the plan into action is an entirely different beast. In order to better conceptualize this idea, let’s make a hypothetical.
You just opened a tech start-up (and hopefully launched with an article on Silicon Bayou). For the past several months your technology company has slowly gained a loyal clientele to the point where you are actually busy now. You’ve worked well by yourself, but you only have so many hands (and MacBook Pros to type on), so it’s time to grow. You always wanted to be the biggest startup in town, but now it’s apparent that might actually happen. Let’s figure out what to do next.
A good place to start is hiring another employee. Though bringing in an employee is easy enough in principle, it has several requirements, including tax codes, workers’ compensation insurance and highly scrutinized record keeping. For more information, visit the U.S. Small Business Administration’s website.
Now that you have an employee you’re really doing well. Business is booming and you’re far in the black. The only problem is that the back end of the business has kept you from truly recognizing your potential. You can make the best iPhone app in the country, but if you can’t handle downloads, advertising, and the other costs of running a business you’ll hold yourself (and your app) back from greatness.
The next step is figuring out how you will automate the back end of your business as much as possible so that you don’t need to deal with it. This is crucial for scaling. Set up as many spreadsheets as possible and take copious notes detailing all transactions, workers’ schedules, and bandwidth. If you are more brick and mortar than technology, simply replace “bandwidth” with “inventory”. Set reminders for any due dates you have, plans for the future and anything else that can be scheduled.
You’re now automated and ready to go. It’s time to open your second office. Depending on what type of business you own, you could go in a variety of different directions. You could potentially secure a small business loan from one of the local New Orleans banks in the community and open a new business with that capital. If you’re looking to expand quickly, you could find potential investors, though you might not own the business outright after that. Lastly, you could find a suitor to franchise a location. This also opens up the possibility of rapid expansion, but it becomes much more complicated.
Regardless, you will probably need to hire several consultants, such as a lawyer and an accountant, plus potentially a public relations specialist and production manager. If you’ve been keeping all your money in a shoebox, now would be the time to talk to a bank and get yourself a small business specialist, which will be able to help you with many of your business needs and advice.
With each company branch you should have an operations manager that you trust and respect, along with a system in order to hire and fire people, regulate operations and make sure everything is up to par. You should also make sure that you don’t scale too quickly, or else your automation process might get out of hand and you could find yourself with a completely unorganized business with no nucleus.
Building a business is challenging, exhilarating and, for some, a dream come true. If you do it right, that dream never has to fade.
This guest post was written by Patrick Rafferty in association with Hibernia Bank. The views expressed herein are those of the author and not necessarily those of any financial institution or bank. This article is intended to provide those reading it with information about matters of current interest. It should not be construed as legal or financial advice concerning a specific topic and should not be acted upon without contacting the appropriate professionals.