Accounting for Growth in Your Small Business

January 31, 2012  |   San Diego Bookkeeping   |     |   Comments Off on Accounting for Growth in Your Small Business

For many small business owners, growth is more of an accident that happens than a well executed plan. That works fine when everything is going well and the economy is a rising tide lifting all boats, as the saying goes, but when things get tough, like they have been the last several years, growth becomes something you have to do rather than something that happens.

If you have to plan for growth (and this includes not just marketing but making sure the accounting makes sense as well) , then you have the even tougher job of executing on the growth. But what often happens here is that in the beginning you have time to work the plan, but as the plan starts to work you back off the plan to deal with the current situation and the growth slows down again- often just at the time you invested in new equipment and people.

In order to keep the growth consistent and yourself on plan, you need to make yourself (and hopefully the rest of the members of your business as well) accountable for making it happen- with specific roles assigned, targets to meet and a no excuses attitude toward completion. If you can stick to that plan, the growth will happen as a result. If not, well, hopefully you like roller coasters!

A company that invests so much time and effort into strategic planning should be set for double-digit growth for years to come. But in many cases, the growth doesn’t materialize.

When that happens, the management team tends to start pointing fingers at each other.  That’s too bad, because in most cases the entire management team shares the blame for not aligning on the specific factors necessary to create growth.

In our experience, execution is all about aligning on three key elements: targets, timelines, and accountabilities.

1. Targets
Each investment opportunity should have a set of targets, as well as intervening milestones, that the management team agrees are necessary to achieve to be successful.  For example, an opportunity such as achieving sales of $50 million in Wal-Mart by 2015 probably involves a set of incremental targets: $5 million in 2012, $15 million in 2013, and $30 million in 2014.  It probably also involves some key milestones, such as securing a meeting in Bentonville or obtaining product approval from Wal-Mart. The most powerful aspect of these types of targets and milestones is that the management team agrees that if the targets are met, the opportunity will likely be achieved; if not, the opportunity will likely be delayed or lost.

2.Timelines
Agreeing on a specific timetable for each growth opportunity is critical to setting appropriate expectations and measuring progress. Additionally, many of the investments or opportunities may be interdependent–that is, two investments may be necessary to achieve the opportunity. If one investment falls behind schedule, it’s logical that subsequent targets will not be achieved.

3.Accountabilities
Arguably the most critical part of a strategic execution plan is having a clear view of who’s responsible for what. One member of the senior management team should be given ownership of each high-value growth opportunity. In addition, accountability should be assigned for each investment, milestone, target, and action required. Agreeing “who has the ball” is often the most important driver of success. When someone’s job or bonus is on the line, you’re more likely to see positive results.

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