How to plan your business's growth

Beat the competition with disciplined expansion

Say you have a successful small business. You have a few employees, and things are going fine. If you're like many entrepreneurs, you may never take time to sit down and think about your future growth—how to take your company to the next level in a smart, disciplined way.

But growth is an issue many business owners ignore at their peril. In fact, it might just be one of the most important issues facing them as entrepreneurs.  “If you decide not to grow, you may be paving a path to failure,” says Patrick Latour, Senior Vice President, Financing and Consulting at the Business Development Bank of Canada. “If you don't grow, your competitors will, and that will put pressure on you.”

The good news, Latour says, is that business owners can create a road map to guide them and reduce their risk as they grow their enterprise. The road map can help them find more growth opportunities and avoid common mistakes, like failing to delegate responsibility to employees (see below).

Need a Plan

To develop your road map, start by committing time to outlining a plan for your growth, Latour says. It should include a few important basics:

• A clear picture of your business's current strengths, weaknesses and opportunities
• A vision for where you want your company to be in the next three to five years
• An action plan to achieve your vision (Who will do what and by when)

Your growth plan could be anything from a rough, informal sketch to a full-blown, highly detailed strategic plan, including everything from a mission statement to scenario planning and financial forecasts.

What's vital is getting the key players in your company on the same page, thinking about your future.

“If you're going to grow, you should absolutely have a plan,” says Paul Cubbon, who teaches entrepreneurship and innovation at the University of British Columbia's Sauder School of Business. “Failing to plan is planning to fail.”

Latour agrees. “The plan doesn't have to be pages and pages long. Sometimes the simpler, the better. But if you don't have a planned, disciplined approach to growth, you're probably going to make more mistakes.”

Regaining Control

Christopher Moreno is a firm believer in creating a growth plan—and following it with discipline. His event planning and production business, 365 Productions, was growing so quickly in 2011 that he and partner Ben Patience worried it was spinning out of control.

“We were concerned about having too many things on the conveyor belt,” Moreno says. “We said: ‘Eventually the conveyor belt is going to be full, and something is going to fall off the end.”

The duo decided to embark on a strategic planning exercise. The process helped clarify their opportunities, risks and respective roles in the company. The result: a detailed five-year plan that included financial forecasts for three different growth scenarios.

The plan helped them boost sales to an expected $3.2 million this year from $1.8 million in 2010. They have even exceeded their goals, meeting their year-three targets in 18 months. And the plan has helped guide a successful international expansion into Britain and Australia.

Along the way, they made sure to meet regularly with employees to see if the plan needs any tweaking and check how their plan is being implemented by measuring progress against their benchmarks. “The plan is 10% of the work; the other 90% is actually doing it,” Moreno says. “If you don't get in the car and drive, the roadmap is useless.”

Tips for financing your growing business

Make a Plan Before You Need the Money

Is it time to go shopping for a major purchase for your growing small business? It can be hard not to get swept up in the excitement.

Whether it’s a major technology upgrade or shiny new equipment, you probably spent hours shopping around for the best product, comparing consumer reviews and talking with vendors.

Then comes the hard part: How to pay for it? Here’s where many entrepreneurs could be doing a better job.

Financial planning for an expansion project may not be quite as sexy as a cool new smart phone or bigger digs for your office. But it’s critical to make sure your investment doesn’t stretch your cash flow and sink you.

“Growth can put an enormous strain on the cash flow of a company,” says Patrice Bernard, Senior Vice President, Financing and Consulting at the Business Development Bank of Canada.

Small business owners often make the mistake of financing growth out of their cash flow or by cobbling together a patchwork of smaller loans for each individual purchase, Bernard says.

Protect Cash Flow

The result can be poor financing rates and repayment conditions. Or even worse—the company may suddenly become caught in a cash flow squeeze. And then it may be too late to line up any financing at all.

“It’s as if you used a credit card to finance your home renovations. Your cash flow would be really affected,” Bernard says.

Bad financial planning is especially common—and risky—at fast-growing companies, says Peter Brown of financial advisory firm Deloitte, where he is national leader of private company services. “High growth can kill you if you don’t have the capital.”

Bernard agrees: “You need to plan more if you’re expanding because you usually have much higher accounts payable and receivable.”

The solution is to take time to do a financial plan for upcoming investments, preferably at the beginning of each year.

The first step is to work out how much financing you’ll need based on your overall business growth plans.

Next, meet with your financial partners early on to discuss your plans and brief them about your needs for the coming year. This is the time to secure a credit line for your investments in the coming year, which you can draw on as needed and then convert into long-term debt at the end of the year.

Plan Financing

The idea is to plan your financing to have the best possible conditions for your debt. The exercise may even show that you need more than one financial partner to give you enough flexibility.

And never pay for large expansion projects out of your cash flow, Bernard says—even if it looks like you’ve got oodles of extra cash on hand right now.

“That’s a big mistake,” Bernard says. “When cash flow is good, you think it will always be like that. But if a company is growing, it has to invest much more than other companies. And profits usually won’t be enough to cover your investments.”

Brown agrees: “It’s always better to seek financing before you need it rather than during a crisis. It shows good management. Financiers are much more likely to give financing to an entrepreneur who shows good management.”

Rob Read always used self-financing at his quickly growing fire extinguisher maintenance company, Bison Fire Protection, as it ballooned from five employees to 50 over the past decade.

But when Read and partner Émile Jolicoeur decided to expand into new lines of business, such as fire alarms and sprinkler services, they realized they needed better financial planning.

They brought in an outside consultant to help them plot out their overall business strategy, and that included laying out a financial plan. The exercise led them to do their first budgeting and forecasting and add overdraft protection and a line of credit to make sure they’ve had money lined up before they actually needed it.

Equally important, Read says, he started including his financial partners more in his planning through regular meetings to discuss coming needs. “They’re partners in our business. They’re definitely part of the team.”

How to build your company's growth team

Tips for attracting and keeping top talent

A fast-growing business can be an exciting place to work. The days may be long, but they're often full of opportunity and new experiences.

But amid the daily challenges, expanding companies often underestimate the importance of making plans and decisions about employees. It can happen in many ways—failing to attract and retain the best people; neglecting staff training and support needs; micromanaging and resisting delegation.

“When a company expands, its human resources capacity has to keep up,” says Mary Karamanos, Senior Vice President, Human Resources at the Business Development Bank of Canada. “An expansion plan can easily go off the rails if the right people aren't in the right positions, fully trained and ready to assume their new responsibilities.”  

“A common mistake that growing companies make is not taking enough time to plan their HR needs,” Karamanos says. “A good place to start is to define roles and responsibilities. That will bring clarity to what needs to be accomplished and what knowledge, experience and competency is required.”

Vince Molinaro agrees. “Growth can be heavily impacted by the talent you have,” says Molinaro, a leadership expert at Knightsbridge Human Capital Solutions, a firm that specializes in helping organizations manage their human resources.

“The good news is small businesses often attract top employees because they can often offer challenging responsibilities, good learning opportunities and personal growth,” Karamanos says.

Create a Talent Plan

Molinaro advises businesses to create a talent plan that integrates how they will recruit, develop and retain employees as the company grows.

• Recruiting—Social media has revolutionized recruitment, particularly business-oriented sites such as LinkedIn. It's important to tap your social networks to get the word out about job openings, including through LinkedIn's discussion groups. But don't forget traditional methods, including tried-and-true word of mouth. How can you avoid costly hiring mistakes? Take the time to do a thorough job screening candidates. Do several interviews with a prospect, and arrange to see them in action. For example, you can ask them to complete an assignment or make a presentation of the kind they would be doing in the position. Check references. And remember: a good fit with your company's culture is crucial.
• Employee training—Development needs may be minimal if your business is small, but some training may still be worthwhile to keep employees interested and progressing. Plan to increase formal training as you grow. As well, support new hires via a buddy program and regular one-on-one sit-downs with a manager. When someone takes on a new role, assign them a buddy who did the task before.
• Retention—A positive, inspiring work climate is vital. Money is important, of course, but so is sincere appreciation, clear expectations and an inspiring company vision. “People really want to be part of a powerful story and a winning company,” says Molinaro.

Entrepreneur Robert Laforce found himself with a talent crunch last year at his rapidly growing business, Trafic Innovation. It designs and makes road-safety devices and traffic-calming products.

Sales had surged 20% annually in the previous four years and several key managers lacked the skills to keep up, he says. Laforce found himself overwhelmed, unable to delegate responsibilities because some managers didn't know how to take them on. He finally brought in an outside consultant who helped him create a restructuring plan geared to his growth goals.

Laforce started by reviewing each job at the company and then decided how to reorganize the positions to allow him to grow to the next level. One important change: Instead of 12 people reporting to him, he now had a more reasonable three.

Laforce replaced some key staff and handed off many of his responsibilities to the new hires, including a first human-resources person. “I hired people who were more competent than me in each area, which made it easy to delegate,” he says. “It was important to delegate so I had time to think more about the future of the business.”

The improved planning has helped Laforce's sales shoot ahead, with 35% growth expected this year. “It's very important to take care of your people,” he says. “They're your most important resource.”

Accelerating the success of smart businesses

Mentoring is Critical for Entrepreneurs

Do you have an idea for a start-up business? Or a new idea for growth in your existing business? Wondering how to get started?

Whether you're in a high-tech or traditional sector, a few common tips can help: find mentors, move quickly and develop a winning pitch.

These tips come from the techniques used in business accelerator programs. They're a new, increasingly popular tool for helping Canadian high-tech entrepreneurs turn promising business ideas into money-making reality. They've also been called entrepreneur boot camps, start-up universities and business hothouses.

But their lessons aren't restricted to Internet start-ups. They can also point the way to how established businesses in traditional sectors can benefit from a start-up frame of mind.

Here's how accelerator programs work: Imagine being able to brainstorm your big idea with 120 venture capital investors and business mentors from companies like Amazon and Facebook—all the while being immersed in an intensive 12-week program designed to help you shape your fledgling concepts into a viable business plan.

And it's capped off with a chance to get start-up funds and pitch prospective customers.

“Accelerator programs are one of the most hands-on, direct ways to support growth for entrepreneurs,” says Senia Rapisarda, Vice President, Strategic Initiatives and Investments at the Business Development Bank of Canada.

“Entrepreneurs get exposed to some of the best practices from around the world and to global thinking from day one.”

Ian Jeffrey is general manager of FounderFuel, one of three Canadian accelerator programs whose graduates are eligible for financing from the $15 million that BDC Venture Capital has earmarked for implementation of its accelerator strategy.

“We create unprecedented opportunities for these entrepreneurs to meet tons of really influential people and build relationships that will serve them forever,” Jeffrey says.

Here are some of the lessons from these programs for both start-ups and existing companies with a growth idea.

Find mentors—Harness your networks to find mentors. They can be invaluable sounding boards. Also consider creating an advisory board for your business.

At accelerator programs, mentors—successful business people who want to give back—are  critical for the success of entrepreneurs.

Lyal Avery was a graduate in FounderFuel's first cohort last year. He is co-owner of Playerize, a company that helps game studios market online and mobile games. “The networking opportunities and education can't be understated,” he says of his time at FounderFuel. “Accelerator programs help companies pull the trigger and grow.”

Your search for a mentor could start at your local chamber of commerce, an industry group or on LinkedIn, the social media site for professional networking. It has discussion forums covering most industries.

Move quickly—Don't take too long to get your idea out of the office and in front of potential customers. See if they'll pay for it—even if the idea is still embryonic.

Accelerator programs give entrepreneurs a short time to test their ideas and figure out if they're viable or not. The lesson? Ask yourself what you can get out into the market—or at least in front of a few potential customers—in a month or a week instead of spinning your wheels for months or more.

Practice your pitch—Accelerator programs give entrepreneurs numerous opportunities to hone their pitch, building up to “demo day,” when they get a few minutes to pitch their project to an audience of hundreds of potential investors and clients from Canada and beyond.

The lesson: Before you head out to see potential investors, clients or the bank, practice your pitch. Try it with colleagues, mentors and friends. Also, film yourself. The results may be painful to watch, but better to catch any flaws yourself than when an important investment or contract is at stake.

One other tip from FounderFuel's Jeffrey: Don't be afraid to fail. Mistakes may be your greatest teacher—if you learn from them. “Most successful entrepreneurs will start three or four companies before they have a slam dunk.”

How to groom your website for growth

Making the Most of Your Online Efforts

Imagine you own a shoe store. It’s in a busy shopping mall and has an inviting storefront with an attractive sign and window displays.

You’re almost guaranteed traffic—and probably sales, too, if you’ve got halfway decent products and prices.

Now picture that same shoe store on an out-of-the way country road with a grimy window and a crooked sign.

It doesn’t matter how great your footwear is. You probably won’t have enough customers to stay in business.

Now ask yourself which of those two stores most resembles your company’s website. In today’s business world, your website is like your storefront. It could be the main way customers are finding you and forming an impression about you.

A properly designed site is especially important if your business is growing and you are trying to improve your profile.

But many small businesses don’t devote a lot of effort to optimizing their site to ensure it’s easily found via internet search engines and geared to help make sales.

Sites need improvement

“A well-designed site can help your company compete effectively with businesses that have deeper pockets and larger marketing budgets,” says Michel Bergeron, Senior Vice President, Marketing and Public Affairs at the Business Development Bank of Canada.

Ranking high in search engine results is vital for your visibility online, Bergeron says. People rarely venture beyond the first page of a Google search result. Indeed, research indicates that websites appearing on the first page attract 90% of the traffic.

Having a poorly optimized website can be a problem even if most of your sales don’t happen over the Internet, says Mark Evans, a leading Canadian digital marketing and startup consultant. “The Internet is the way most people discover new products and services.”

Happily, small businesses can use simple, inexpensive tools to help level the playing field with large businesses, Evans says. “A small, agile, creative company can be as effective online as a big company.”

Philip Murad has found a way to turn his website into a gold mine for his fast-growing business, Philip & Henry, which books magic shows for a network of magicians across North America.

Murad’s website accounts for three-quarters of his sales, which have been growing up to 30% annually for the past decade.

Clean, simple layout

Visitors to Murad’s site are greeted with a clean, simple layout that’s easy to navigate without a lot of scrolling or clicking. The site prominently displays links allowing them to get a price quote or book a show in their area. There’s also a short YouTube video featuring happy customers, and contact information is easy to find at the top of the page.

The site also ranks phenomenally well in Google searches—showing up on the first page out of 150 million results for the term “magic shows.” A paid ad for Philip & Henry is the top result in a search for “magician.”

Murad credits years of experimentation with search engine optimization—the art of getting search engines like Google to rank your site near the top. He sprinkles his content with a few dozen keywords that describe his business and help him stand out from the competition.

He also works hard on attracting links to his site. That’s because such links are one of the main ways Google uses to determine search engine rankings. The more links to your site, the higher you’ll usually rank.

“There’s a saying: ‘Content is king and links are queen,’” Murad says. “The more people talk about you and share your content on Facebook, social sites and YouTube, the more it improves your ranking.”

All his online efforts have paid off with a payback higher than for any other kind of marketing, he says—worth up to $100 in returns for each $1 in costs for his best-yielding campaigns.

 “If there was no Internet, we’d be finished. It’s huge for my business—absolutely huge.”

10 things you (probably) didn’t know about Canadian SMEs

Small business is big in Canada: 98.1% of all businesses have fewer than 100 employees. When you add in medium-sized businesses (100 to 499 employees), the percentage rises to 99.8%. They are the engine of the economy and their success is vital to Canada’s prosperity.

Here are 10 things you probably didn’t know about small and medium-sized businesses (SMEs) and their impact on Canada’s economy.

1. There are almost 1.2 million SMEs in Canada.
2. More than half (55%) of them have fewer than 4 employees.
3. Only 1.7% are medium-sized businesses.
4. SMEs employed almost 64% of private sector workers in 2011, or 6.8 million people across the country.
5. Over the 2001 to 2011 period, SMEs were responsible for 54% of all jobs created on average by the private sector.
6. SMEs represent 54.3% of the economic output produced in the business sector (in 2005).
7. 86% of exporting companies have fewer than 100 employees, but produce only 25% of the total value of Canadian exports.
8. The largest number of SMEs are in the retail industry (13%).
9. Fewer than 1 out of 4 Canadian SMEs invest in research and development (R&D).
10. Only half of new firms (53%) survive their 5th year of operation.

Source: Statistics Canada.

That’s why for 33 years the Business Development Bank of Canada (BDC) has been organizing Small Business Week.

Marketing and sales: What are the Canadian entrepreneurs doing about it?

Effective sales and marketing strategies are crucial to the success and growth of any business. Having a sound strategy, planning carefully and then monitoring the results are essential steps to reach more clients.

A recent BDC survey asked Canadian entrepreneurs about their marketing and sales practices. Here are a few highlights.

Marketing budgets

• The survey indicated $31,000 was the average marketing budget for small and medium-sized businesses.
• As the size of the company increases, so does the average sales and marketing budget. Companies that have between 20 and 49 employees invest around $64,000 in marketing and sales on average, while businesses with 50 or more employees have an average annual marketing and sales budget of $103,000.
• 30% of SMEs invest less than $5,000 annually on marketing and sales activities.
• One out of four SMEs (26%) have no one specifically assigned to marketing.

Internet and social media marketing

• 83% SMEs have a website, and one in five have a transactional one—where online purchases can be made.
• Half of entrepreneurs (54%) advertise online.
• Two thirds of the businesses that advertise online (64%) participate in social media.
• Most of the entrepreneurs (61%) say they do not monitor online comments or discussions about their company, its products or services. Only one in five respondents (20%) mentioned making some effort to monitor online comments and discussions, but do so in an unstructured manner.

The Elevator Pitch

• 50% of entrepreneurs said they believe they could tell their company’s story in a 60- to 90-second statement or a Twitter-length, 140-character text.
• Another 19% said they probably could do so but with a bit of difficulty.

The results are from a survey of members of BDC's ViewPoints online panel conducted earlier this year. BDC is currently recruiting Canadian entrepreneurs and professionals to join the panel. Apply at www.bdcviewpoints.com