OCTOBER 2004

ABCs of Accounting: Growth

Growth and expansion can create unexpected challenges for your micro-business. You may have started a business to be your own boss and now you need to become the boss of others. Your company may be successful because of your attention to detail and now you must delegate. Your business and personal life may be working well right now because you work from home and are available to handle problems in both areas as they arise. Now you may need more space than your home situation will allow. Growth may mean that larger contracts are now available but more financial resources are needed to buy inventory or cover costs until payments on large contracts are received. This new level of success may require more detailed tax planning, revising corporate structure or improving the quality and timeliness of financial information.

Deciding to hire employees is a difficult decision. Working space may be a problem, and in the short-term your personal income may be decreased to pay for the employee’s salary. Plus, you now have the responsibility for someone’s livelihood on your shoulders. All of these things can be daunting, but with the addition of the right personnel, your ability to reach new levels of success will be possible.

Often, the first person added to the payroll is administrative help. However, if the administrative burden is not too great, adding a new sales or creative person may be best for your business. Another possibility to consider is contracting some functions to an outside party. If keeping the books is becoming too time consuming, consider having a bookkeeping firm help you with these duties.

Moving to a bigger location or expanding your current facilities can also be a challenge. What type of space is needed (office, warehouse, retail)? Do you want to rent or build? What length of commitment is comfortable? In many cases, it’s a good idea to get a broker who specializes in the type of real estate that you’re interested in. The broker will narrow the choices before you invest your time. A visit with your accountant may also be beneficial to get more information on the tax benefits of your proposed change.

Financial issues may also influence the facilities question. Cash flow is generally a concern for young, growing companies. For micro-businesses the sources of financing are usually personal funds, bank loans, loans or investment from family and friends, or other leasing/financing options.

If a bank loan is the route you decide to follow, help is available through the Small Business Administration at www.sba.gov. If your business has grown beyond the micro-business stage, venture capital may be something to consider. Generally, venture capital looks for investment with a rapid, high rate of return. Control is frequently ceded to the venture fund, but the growth can be explosive.

All of these changes will create the need for better procedures to handle the increased volume of information. You will need more insurance for facilities and personnel. You will need payroll to be processed and reported to the IRS. You will need periodic financial statements to be sent to investors or lenders. You will need to develop ways to keep orders processed and customers happy. You will need new ways to reach potential customers. In short, you will need an increasingly sophisticated way of managing your business.

Today, the Internet is an increasingly important tool. Making your products available for order through a Web site, ordering your supplies online, keeping up with the competition by seeing new product offerings and by reviewing news articles about your industry are all functions that can be handled through the Internet. Tools to help you with all of these tasks are readily available. You can always find software, books and consultants with advice to help your business achieve growth.

Growing your business can be an ongoing challenge, but it’s one that you, as woman small-business owner, are fully equipped to handle. You don’t have to do it alone. There are resources to help you. The government can help through Small Business Administration consultants and other specialists. Additional information is available on the Internet and in your bookstore. Fellow entrepreneurs may have a lot of ideas to exchange with you as well. Remember, tackling these challenges has got you where you are today and has made you the greatest source of growth in the American economy.