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Success a fork in the road, never a dead end

2 January 2019

 

Sometimes the structure of how a company is run needs changing when success is achieved.

This may seem counterintuitive. Why alter a winning formula, after all? But the qualities of organisation and leadership needed to create a business are often different to those required to help it grow further.

The next stage in developing a successful company depends on three central factors: Having the right people on board; developing the finance function; and looking at how best to raise funds.

Investing in your human resources function will not just help to manage growing staffing levels, but also to help ensure that the best people are recruited. Your people proposition will be key to the journey ahead.

Good financial information is also now even more vital. You should think about the internal and external finance functions, which may involve hiring an interim chief finance officer and, ultimately, even a permanent finance director.

As for raising money, this requires especially careful planning. Every avenue that brings outside investment comes with obligations as well as opportunities.

Recently I worked closely on a crowdfunding campaign for Cambscuisine, an expanding restaurant, pub and catering business. This work brought in investment, but also attracted a key investor with a track record of success in the same area. He has taken a place on the company board and brings invaluable experience as the company expands.

But for some businesses, existing shareholder funds or traditional bank loans are more appropriate. Every option needs to be weighed up, carefully taking into account not just the financial aspects, but also the extra reporting and compliance obligations that can follow from widening the investor base.

There is also the potentially awkward question of who should be leading the business in its next phase and the team they will need around them. There may come a time when it’s essential to take a look at who is around the table and what the business needs to drive it forward. A founder is not always the best leader.

One of the difficulties is recognising when the moment to reassess has arrived: what needs to happen will depend on how the question ‘what is success?’ is answered.

Founders do need to try and agree a response. If that proves impossible, it may be the sign to rearrange executive structures and responsibilities.

The divisions that can occur in a founding team when the initial common purpose is achieved emerge for all sorts of reasons, none of which are to do with cashflow or technical issues.

There can be disagreements about future direction, for example, concerned with whether to consolidate around stability or to push for further growth. The attempt to agree a long-term vision may also be complicated by individual desires to step back or to realise an equity stake.

The key lesson from success when it arrives for a new enterprise is to recognise that it is not the end of the process, but a new beginning. It is a fork in the road, never a dead end.

This article was first published by Business Weekly. It is available here in the Business Weekly blog.

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