Growing Your Business

People enter business for a variety of reasons. Some want to get rich, others want to be their own boss, others want to change the world. When people start a business they anticipate growth. However, few actually consider what needs to be done or what they want to achieve in growing their business.

Growth has traditionally been regarded as the stage of the business life cycle that follows market entry. To advance to the growth stage, and stay there, all the challenges and changes caused by sustained growth must be well managed. This is no easy task. Growth means changing how you do business, investing in new technology, more employees, less centralized control and likely the need for more money.

To succeed in business you need to be constantly aware of what you are doing and of the changing market place. You must respond or, better yet, lead the change. When you are looking at expansion it is with an eye to the future, but it also requires confirming what your core business is and building on that. You need to drop products or services that are no longer worth pursuing to have the resources to channel toward growth initiatives.

It may not seem like a quantum leap to grow, but people who have added a new location to their business talk about how amazingly difficult the challenges were.

Have a plan

When you started your business you likely created a business plan which mapped out the strategy and demand for your business and what you would do to be successful. A Business Plan is not intended to be a "one-off" rather it is a tool that you should be reviewing and reworking throughout the course of your business. As your business rolls along it is essential to be vigilant in tracking how your business is doing financially and in the market. How are sales doing? What products are growing in demand? What products/services are showing decline and why? Are there new trends or products on the horizon that you should adopt, or that could challenge your position in the market place? Are there any new products or services or variations that you could bring to market? These are questions you should be asking. Have goals for what you plan to achieve with milestones and anticipated outcomes to evaluate your performance.

Prior to embarking on plans for growth, it is essential to ensure that your present operation is running as effectively and efficiently as possible. If it isn't, adding the extra challenges and expenses that growth entails may threaten your efforts or even the viability of your company. You must be solidly rooted financially and have good management and financial systems in place or the shortcomings will be exacerbated as you grow.

Ten Most Common Growth Mistakes

Here are the 10 most common mistakes made by entrepreneurs as they plunge into their first business.

1. No growth plan
   
   
   • A business cannot operate or grow without a well researched plan
2. Wrong business, wrong location
   
   
   • Poor choice of location or business that doesn't suit their interest or temperament
3. Lack of technical skills
4. Lack of sales and marketing skills
5. Lack of financial management skills
6. Undefined financial resources
   
   
   • Growth can be a slow process taking years, many businesses start on a shoestring (inadequate) budget
7. Lack of market research
   
   
   • Most people don't spend enough time learning about their market and competition and responding effectively to both
8. Investing in trendy businesses
   
   
   • Many people jump on the bandwagon of trendy businesses without researching their longevity. A business should have a projected life of at least 10 years. Study future trends to ensure you are filling a long term niche. Cater to long term trends -- Think of ways to diversify and cater to a growing business trend
9. Over-projecting sales, under-projecting marketing costs
10. Professionals are not consulted
    
    
    
    • Accountants and lawyers can be valuable advisors and assistants in times of trial. Few small business owners develop a relationship with these potentially valuable allies.

Source: Big Ideas for Growing Your Small Business, Frances McGuckin, 2001

Reasons For Growing

Every business owner wants to run a successful business and see it grow. However, in addition to the gratification that comes from seeing your business succeed, there are other reasons for pursuing business growth. As businesses grow they can benefit from economies of scale to reduce operating costs. Generally, the larger the volume of production the lower the cost per unit to produce. Also, the higher the volume of sales the lower the margin needed to be profitable.
By increasing your share of the market you can achieve some control over such variables as the market and pricing. Adding new products or expanding into new markets can diversify your business and help you better weather tough times. If you have a variety of products or services, when the demand for one is down, the other products may help to offset that drop.
You may be very happy with how things are going with your business and see no need to grow. However, in the business world, as in life, if you aren't moving, changing and improving you may not be alive. Businesses must be analyzing the present and consider the future. To meet the changing business world and market, plans must be made in order to survive as well as grow. A company that isn't growing may become complacent, lazy, and unable to adapt and eventually become incapable of operating.

Ways to Grow Your Business

It can be tempting to try to grow in all areas at once. However, this can be difficult to achieve. Focus on the kind of growth you can manage rather than attempting to achieve everything at the same time.

• Sales Volume
  Most businesses judge their success by an increase in sales volume. This can be a good growth oriented strategy to pursue. What strategies could you pursue to increase sales?
• reduce price - more marketing - add products - open second location Remember, do not sacrifice profits to gain sales!
• More Customers
  It can be possible for too many sales to be coming from a few customers. Customers can change their buying habits. Adding new customers is an essential consideration in planning business growth. Advertising and marketing can help you develop new customers as can good customer service (word of mouth promotion).
• Increase Production
  Do you have the capacity to increase production? Take on more contracts? What will be the cost/resource implications of doing so?
• Internet Marketing
  The Internet might offer some cost effective opportunities to promote your products or services or expand into new markets. See E-Business : Getting Started for more details about this vital marketing opportunity.
• Value-Added Services/Products
  If you can slice up your market or service area finely enough to see a potential for dominant market share, then increasing market share may be the way for you to grow. When you become one of the dominant players in a market you can have more control over the direction of the market.
• Increasing Profits
  In some markets it may not be feasible to seek growth in sales volume. In this case focusing on products or customers that provide higher margins can increase your profits without increasing your target market. Cutting costs or raising prices modestly may be able to increase profits.
• Growing Your Work Force
  Adding staff or sales personnel can increase production capacity or sales growth. However, with added staff comes the need for additional training, supervision and motivation. New staffing must always be justified by an increase in sales volume as well as profits.
• New / Additional Products
  Growth based on new products, particularly "hot' new products, can yield revenue that is both fast growing and highly profitable. Watch the marketplace or investigate other sources to identify new products with potential. Try to stimulate innovation within your organization to create new products or services.
• New Markets
  Finding a new market whether in a new neighbourhood, new town or new country can be effective in achieving growth. Market research will be required to determine the suitability of various markets and to enable you to effectively compare different options. Investigate government agencies and sources of information to assist you with your market research and analysis.
• Adding Locations
  For many businesses sales are likely to be the same at each location so opening additional locations can be a way to grow. However, as with finding new markets, this option can add stress from additional staff and other challenges inherent with new and remote locations.

Other options for growing your business:

• Licensing
  The licensing of patents, trademarks, copyrights, industrial designs and other intellectual property to others can be a fast and profitable way to grow your business. Licensing enables you to tap the existing production, distribution and marketing systems that other companies have developed. In return, you get a percentage of the revenue from the products or services sold under your license. The negative side of licensing is that you get a "smaller piece of the pie".
• Franchising
  Franchising has emerged as a very popular expansion strategy for business. Sales from franchise outlets make up approximately 30% of all retail sales in Canada. To franchise your business you must have several years of successful operation to your credit. A franchisor normally receives an initial franchise fee, and a continuing fee, a royalty, that represents a percentage of the sales generated by the franchise businesses. Franchising can be a low-cost way to expand, but it is also likely to be a low profit way. At least initially, the effort and cost involved in development, marketing and training of franchise operations reduces profit. Also, the Franchisor is often required to commit to a substantial marketing program on behalf of all franchisees.
  
  
  
  • Reasons for Franchising*:
    
    
    
    • To obtain operating efficiencies and economies of scale,
    • To achieve more rapid market penetration at lower capital cost,
    • To reach targeted customers more effectively through cooperative advertising and promotion,
    • To sell products and services to a dedicated distributor network,
    • To utilize motivated owner operators instead of internal personnel,
    • To shift some of the responsibility for site selection, training, personnel management, and advertising to the franchisee, licensee, joint venture partner
    *Source: Running and Growing Your Business, Andrew J. Sherman
    For more information, consult "Franchising Your Business"
    
• Acquisitions
  One way to achieve "instant" growth is to buy another company. Companies acquire other companies to increase market share, gain access to promising new technologies, to tap new distribution channels, to gain control of undervalued assets and for a variety of other reasons. Depending on how the takeover is implemented there can be many challenges in integrating with or operating the additional company.

Challenges to Growth

While you want to succeed and are eager to grow, growth can have its hurdles and challenges.

• Financing Growth requires money and that is one of the challenges most businesses and especially new businesses face. Plant expansion, purchasing new or additional equipment, hiring and training new staff, expanding into new markets -- all require funding which may not be available within the company. To enable your continuing growth you will have to explore your financing options: line of credit, term loan, financing, selling equity to investors, venture capital.
  To secure financing you will have to demonstrate a successful track record. This means you need good records of past performance, detailed market research, a well thought out and presented business plan and projections to make a convincing case to your potential investors/lenders.
  
• Competition The competition you have in your market can also be a limitation to growth. If there are many competitors, or strong competitors, you may have a challenge to increase your share. Careful analysis of the current market and a careful assessment of how to take advantage of your strengths and minimize your weaknesses will be required. What can you do to differentiate yourself from your competitors and win the confidence and loyalty of customers?
  
• Market Size There are limits to every market. You cannot sell more than your customers want to buy. If the market you are in is too small to meet your goals you will have to explore new markets, switch markets or find a way to improve your competitiveness in your existing market to continue to grow.
  
• Labour Supply Sometimes business growth can be hampered by a lack of sufficient or adequately trained staff. Careful planning and foresight can ensure that you have a workforce available to meet your needs for growth. Training, development and recruitment of staff can be critical to the future success of your business.
  
• Personal Limitations You cannot do it all! As a business grows it is impossible for one person to manage all aspects. As your business grows you will have to relinquish control to staff and consult with expert advisors to help you with your operational and planning decisions. Many "new" entrepreneurs find it hard to "let go".
  

What Makes a Company Succeed and What Positions it for Success...*

• Study the success of others
• Study your competition
• Gather and analyze information in the four areas strategic to your business - finance, customers (develop a profile), your industry (what other are doing and how) and your market (what the trends are)
• Know who your best customers are - and treat them accordingly
• Hire professional help when you need it
• Use the best tools available
• Solicit suggestions from employees
• Give your employees what they need to get the job done
• Be a role model for your employees
• Be a boss, not a buddy
• Develop a good relationship with your banker
• Learn to network
• Learn how to compile and analyze financial reports
• Concentrate on your niche and what it does best
• Be willing to do what it takes to improve
• Sharpen your marketing skills
• Eliminate waste
• Know when it's time to make a change

* Source: The Small Business Owner's Guide to a Good Night's Sleep, by Debra Koontz Traverso.
Sources used in preparing this article:

• Big Ideas for Growing Your Small Business, Frances, McGuckin, McGraw-Hill, 2000
• Complete Guide to Running and Growing Your Business, Andrew J. Sherman, Random House, 1997
• Growing Your Business, American Entrepreneurs Association, 2001
• The Small Business Owner's Guide to a Good Night's Sleep, by Debra Koontz Traverso

Top 10 Tax Havens

This country is imploding, and not because of the mounting job losses and mortgage foreclosures, or ex-bankers pole-dancing to put food on the table, or Latvian-owned brothels refusing to accept credit cards. No, I’m talking about something far more dangerous: the rush among the world’s “elite” governments to wage war on simple wealthy folk to recover taxes on income believed to be hiding in offshore shelters.

There are many reasons why this is wrongheaded, foremost of which is a disgraceful lack of respect for the autonomy of the world’s more diminutive nations. Hey, if a small country wants to set a zero-tax policy, as opposed to the 35 percent tax rate in the States, I will defend their sovereign right to do so with—well, maybe not my life, but certainly the lives of several thousand of my working-class countrymen.

Herewith, then, is a list of the safest offshore sites for your spare millions.

no. 1

CAYMAN ISLANDS
A mere 15-minute suborbital rocket flight from Florida, these three little islands south of Cuba attract one big swinging industry: hedge funds. Start up an exempted corporation here and there’s no tax on income, profits, capital, wealth, capital gains, property, sales, estate, or inheritance—I’d go on, but the excitement of an equity spike makes me squirt.

The capital, and the financial and business center, George Town, is home to more registered businesses than people, a fact that prompted Barack Obama in a 2008 campaign stump speech to attack the Ugland House, a five-story office building that, according to Mr. Big Government, houses 12,000 corporations. “That’s either the biggest building or the biggest tax scam on record,” he said. “And I think we know which one it is.”

I felt like I’d been gut-punched by Karl Marx (easily the least funny of the brothers), so I checked Obama’s “information.” Sure enough, he was wrong: It’s not 12,000 corporations that are registered at Ugland House, but 18,857. Let’s stick with the facts, Mr. President.

no. 2

LIECHTENSTEIN
In a picturesque mountain valley between Switzerland and Austria sits the world’s oldest tax haven, a tiny pimple of land no bigger than the dog run behind my second home, a microstate called Liechtenstein. How thrilled am I about its extremely strict banksecrecy laws? When visiting, I send my underlings out to give every one of its 135,000 citizens a high five (in German, of course—hoch fünf !).

But even better, I love Liechtenstein for its famed “rentastate” program: For as many as 1,200 people, at between $320 and $530 a day per person, you can rent the entire country, granting you access to its restaurants, hotels, castles, and clothing-optional ski slopes—there’s simply no better way to demonstrate wealth than to slalom downhill with three poles exposed. A few years ago, my hedgefund partner, Morty, rented Liechtenstein for his son Benjamin’s bar mitzvah; I’ll be doing the same soon for my son, Grant—and we’re not even Jewish.

no. 3

SWITZERLAND
Not even the frigid Alpine altitudes will freeze your assets here. The Swiss have long provided a refuge for us financially persecuted types; their fabled tax loopholes are why they control 40 percent of the world’s private wealth, and also why I named my firstborn Heidi, even though my firstborn is a boy. There are more banks in this offshore Shangri-la than anywhere else in the world: big banks, private banks, savings banks, Ernie Banks, mortgage banks, and commercial banks. This allows me to diversify investments while protecting myself from creditors, the ravenous IRS, my wife, and my girlfriend.

There’s been quite a scare lately about the Swiss bank UBS surrendering the identities of its American customers, but as long as you avoid a Swiss bank that has employees in the United States, you’re safe from attack. For the record, whereas most countries will merely fire a bank employee who leaks information, the Swiss will throw him in jail. There, conditions are so punctual and precise—and crushingly dull—that he will be yodeling a confession in no time, out of sheer boredom.

no. 4

PANAMA
If Switzerland wore a thong, it would look a lot like Panama, which has nearly identically impenetrable bank-secrecy laws. This is important because checks written from a foreign account allow you to enjoy “float time,” usually three weeks between the writing of a check and its arrival at the bank for clearing. During that period, you continue to earn interest on the money in your account—a time I refer to as “Pan-a-Mania.”

Panama is home to plenty of freedom-loving Americans who relish the absence of a personal-income tax on money they earn offshore. You can also drink the water, and the American-style AC/DC electrical system allows me to use my paper shredder with impunity.

But while it’s easy to avoid taxes there, it’s more difficult to avoid mosquitoes. They swarm like malarial Democrat pests chasing me into my stretch Hummer. If you must walk outside, I suggest hiring local children to shoo them away by fanning you vigorously with W-9 tax forms.

no. 5

GIBRALTAR
Gibraltar, aka “the Rock,” is a monkeyinfested 1,400-foot limestone protuberance rising from a bay on the southern tip of Spain. It was designed as a monolithic tribute to Prudential. And rightly so, for upon the Rock’s solid foundation I incorporated an Internet gaming company, Jonesing4Poker .com, which capitalizes on the fact that Brits don’t pay taxes on winnings from gaming companies based in Gibraltar (see also: PartyGaming.com, Ladbrokes.com, and 888.com). Even
more impressive than the low tax rates are the hundreds of free-ranging Barbary apes that roam the city. (Technically, they’re macaques—a kind of monkey—and the only nonhuman primates living in Europe, unless you count Silvio Berlusconi.) One was wily enough to steal my copy of Sean Hannity’s Let Freedom Ring on a recent visit, and then return it—highlighted.

no. 6

COOK ISLANDS
Whoever said “No man is an island” never set up a shell corporation in the South Pacific. The 15 stunningly green volcanic Cook Islands, located near New Zealand and Tahiti, embody lagoon capitalism at its best, particularly in the capital of Rarotonga. There you’ll find full-service, oh-so-lightly regulated English-speaking banks and plenty of Internet access. Combined with the fact that it’s only three hours behind California time, this Polynesian outpost is the perfect place to swing on a hammock with a rum drink in hand (ask for “the Reagan”), press play on the iPod, and fill your brain with the sounds of Buffett—not Jimmy, Warren.

no. 7 and 8

ST. KITTS AND NEVIS
Is this one country or two? I’m not even sure! But I do know that in the 1980s, St. Kitts and Nevis transformed from
a sugar colony whose economy was frequently ravaged by hurricanes into a rock-solid tax haven. This would have prompted a vigorous “thumbs up” from Nevis’s favorite son, the first U.S. Secretary of the Treasury, Alexander Hamilton. This tiny east Caribbean nation grants full citizenship if you buy property worth more than $350,000, allowing you tax-free foreign income, capital gains, gifts, wealth, and inheritance. I bought a house in the capital of Basseterre, sight unseen, that included a family of six, an inground pool—and stunning views of Oprah Winfrey.

no. 9

BELIZE
For me, this former British colony—with its unrivaled scuba diving, dense rain forests (home to the rare scarlet macaw, whose throaty mating call sounds like “div-div-dividend!”), and ancient Mayan ruins—represents a great investment opportunity. The country’s QRP, the Qualified Retired Persons program, has attractive benefits for those who wish to spend their golden years in Belize. I’ll be settling my parents there—in a fourstar, full-service hotel; we’re suing
for the legal rights to build it inside a centuries-old Mayan temple. It’ll be called the Cashmore, and my father’s income from working there as a bellboy, and my mother’s as a chambermaid, will be transferred into a Belizean trust, where it will gain interest virtually tax-free.

no. 10

NEVADA
I wish my accountant, Vern, had advised me about the tax havens here in the States before I renounced my citizenship and started taking daily estrogen shots to grow breasts to alter my identity. But it’s true: Nevada’s official website promotes its “limited reporting and disclosure requirements” and ultraconvenient one-hour incorporation services. It’s like getting married, except Elvis won’t be presiding and nobody takes half your stuff when you cancel the contract. A “don’t ask, don’t tell” policy (the state doesn’t ask for the names of your company’s shareholders, and it won’t normally tell the feds) has attracted more than 400,000 registered corporations—that’s a company for one person at every blackjack table in the city. And for foreigners, Nevada is a great place to stash cash, since it does not tax the interest income they earn.

Strong foreign demand for Canadian stocks and bonds

Foreigners bought a net $11.8-billion of Canadian stocks and bonds in January, according to a Statistics Canada report Thursday. That includes $10-billion of bonds, about two-thirds of which were issued by the federal government to finance spending aimed at boosting the economic recovery. It was the third straight month of huge purchases of Canadian securities by international investors, who in 2009 bought a total of $110-billion of Canadian securities including a record amount of bonds.

Demand is so high both from abroad and within Canada that money managers are “starved for product,” said David Baskin of Toronto's Baskin Financial Services. The attraction among investors to Canada could stay red-hot, he added, as long as it appears the Canadian dollar will gain or hold firm against other currencies.
Foreign investors in particular are eyeing Canada, though the country is not as dependent on investment from abroad to meet its financing needs as other nations are. In the United States, almost half the bonds available to non-government investors are held by people in other countries, such as China and Japan.
While both Canada and the U.S. are running large deficits, Canada's is substantially smaller even on a per capita basis.

And while Canada is now running a current account deficit, by definition requiring some foreign capital to fill the gap, Canadians share the global preference for their country's securities over those of other nations. In January alone, Canadian investors dumped a net $5.8-billion of foreign stocks and bonds. Money managers are often frustrated by the relatively scarce amount of government bonds available – a product of the record-setting run of 11 successive budget surpluses that whittled the country's debt down sharply.
“Investors get attracted to strong things, and we are in that camp now,” Adrian Mastracci, a portfolio manager at KCM Wealth Management in Vancouver.

The high level of demand at home and overseas is both driven by and contributes to the Canadian dollar being ever so close to parity with its U.S. counterpart. And it means Canadian governments issuing debt can pay less to the investors buying it when the securities mature.
Canada's current budget shortfall is 3.5 per cent of gross domestic product, compared with almost 11 per cent in the U.S., and as a result the U.S. government's interest payments are on track to increase by 170 per cent over the next five years while Canada's will stay essentially flat.

“It helps Canada in keeping some of those government expenses down, but on the other hand those in Canada that want to be bondholders may not be able to get the total allocation they're looking for,” Mr. Mastracci said.

Mr. Baskin reckons that demand could stay strong about six months, at which point the loonie's strength against the U.S. dollar may recede as the American economy improves and the Federal Reserve prepares to start raising interest rates if it hasn't done so by then.
According to the debt management strategy the government released earlier this month with the budget, the Finance Department will sell $95-billion of bonds in the fiscal year beginning April 1, less than the $102-billion in the current year but about 20 per cent more than many economists expected, according to a survey done by Bloomberg.

The $111-billion 12-month net foreign purchase of Canadian securities is more than enough to fund government borrowing and about triple last year's $41-billion current account deficit, Bank of Montreal deputy chief economist Douglas Porter noted.
However, the fact it's easy for Canadian governments to borrow could eventually encourage some to overspend, he said.

“Oftentimes investors will give you enough rope to hang yourself,” Mr. Porter said. “`In some ways, if it's so easy to finance a deficit, there isn't the pressure on governments to pull in the reins.''

Bucking Convention

Written by Steve Mortensen on February 27, 2010

at the Ready for Investors Blog

 

When you’re at the cusp of wanting to raise capital to start or ramp the growth rate of a business, the issue of business plan creation is sure to arise.  You’ll need some documentation to help tell your story.  With the issue come a plethora of considerations.  

Here are my Top 5.

Do you really need a business plan, and why?

What’s the fastest, easiest and cheapest way to get one? 

Should you copy one for a company that got funded and edit it? 

Should you do it yourself or hire someone else to do it all for you, and why? 

Can you just start with an executive summary? 

I’ve reviewed many websites, articles, software programs, videos, audio files, and books on the subject of writing business plans for raising capital.  Here’s what most of them say in answer to these questions:

You need a business plan so you can effectively communicate your business to investors, employees, and other stakeholders. 

The fastest, cheapest, and easiest way to get one is to copy and edit one.  However, this is the least effective way to create a business plan.  You get out of the effort what you put into it.  It would be like trying to become a medical doctor by using someone else's lab work and notes.   May I never visit a doctor thus prepared to practice medicine!

Ditto on copying and editing a plan for a company that got funded. 

Most experts say you should write the business plan yourself.  Sweat it out, gain from the pain, pay your dues, and all of that.  This approach has merit, and you’ll become much more knowledgeable about your business.  But you’ll almost certainly waste a whole lot of time trying to figure things out on your own, learn lots of things that are useful and interesting but not yet critical, and probably have to do quite a few rewrites as you start showing it around.  If you can partner with someone who knows the ropes and is willing to work with you through the process, kind of like a personal trainer or a mentor, you can reduce the time it takes to create a solid business plan and be prepared to present it effectively.  I’m not talking about turning the whole thing over to someone else to create for you, but engaging the support of an expert who works with you to do it right the first time.  

All this stuff is pretty straightforward.  It’s going to take time to create a business plan, and the clock is ticking.  

So it’s the final question I primarily want to address. 

Can you just start with an executive summary?

Many entrepreneurs, realizing that a business plan represents a significant investment of time, wonder if they could perhaps create an executive summary and start shopping it around while they work on the full plan …

In theory, it’s a great idea.  But most experts concur that this is not a good approach because you have not thought things through well enough yet, and so you’ll be communicating faulty information. 

Well, I’m not most experts. 

I believe you can and often should go with an executive summary first for a number of reasons.  With one caveat.  First you need to build a comprehensive financial model that tells the story of the business with numbers.  Then you’ll be prepared to start hanging words on the numbers, even in abbreviated form. 

The benefits of this approach include:

• During the process of creating a comprehensive financial model, you’ll think through all aspects of your business, and see how they interrelate with each other.  You’ll have a clear picture of your key success drivers.
• After you’ve done the complete numeric creation, it becomes quite easy to start putting the story into words.
• A solid executive summary supported by a comprehensive financial model can be developed faster and at a lower cost than a complete business plan.
• This speed means you can start circulating the executive summary to generate interest in your business, and even start raising capital, while your business plan is in development.  I have many clients who have successfully followed this path.
• For start-up businesses in particular, this is an economical way to test the waters to see how viable your business is and how attractive it will be to investors before you invest heavily in time and other resources.

The viability of this approach all comes down to one thing – how effectively you develop a comprehensive financial model before committing your ideas to words.   And that’s a topic for another time.