All we need is a million dollars, and we will be unstoppable! (A cautionary tale)

Keith Heffron is a TechCXO Partner and an innovative financial leader, business owner and transformative CFO who scales emerging companies. See his full bio

At TechCXO, we’re fond of saying that part of the CFO’s job is not to save money but to spend it. Spend it, that is, to fund the scaling and acceleration of a company in ways that increase enterprise value.

As business owners, we all fall in love with the idea of our business growing into a huge success. Thinking big is a good thing.

You also have every right to ask your CFO to model an aggressive growth plan and to help secure the capital to help that plan take flight. That’s what we’re here for.

However, the same amount of energy and forethought you put into the concept of “How fast could we grow if we had an additional $1M investment?” should be applied to asking “How fast can we grow without sacrificing quality, our reputation, or our values?” And, “What, if any, additional investment is required to achieve this level of growth?”

The best approach is to build a Marketing, Sales, and Operational plan to support the financial plan growth you are targeting. Then, consolidate these individual department plans into an integrated financial model. The resulting cash flow projection will tell you how much of an investment you might need and the timing of that need. It will also allow you to modify your plans based on constraints. The result should be an integrated financial and operational plan that the entire organization understands and is confident of achieving.

Remember when you got your first 10 customers? Everyone was all over them! Everyone knew what was going on, hand-offs were well communicated, and you had your arms around all of it. Things didn’t go perfectly but you were able to react quickly and course-correct well. But then 10 became 20 and you experienced your first growing pains. Everyone was in everything, ownership and hand-offs weren’t clear, and the cost of breakage wasn’t something you had planned for.

Time to assign positions, ownership, metrics, and invest in hiring and systems. While these are all good and necessary things, each requires its own plan and considerations. I further suggest to you that this process of re-evaluating as you grow should be a non-stop process that you should dedicate time to every month with your team.

If you are making plans to solve your many current problems, you are already behind. Are you considering the impact of growth on all areas and are you prepared to pull the necessary levers when that growth comes? Does every person in your organization know how their job will be impacted if customer volume doubles? Let’s work through an illustration to clarify.

Bob is in customer service. He has amazing rapport on the phones and customers love him! He can handle any problem and knows how to make customers feel appreciated. Sure, he has to work a bit of overtime on heavy days but he always keeps customers happy. He’s the kind of employee you can build a company around.

Now imagine that customer volume doubles. Bob can’t keep up and each call is taking longer. He is spending too much time apologizing for delays, he is tired and his quality is slipping. Complaints are getting back to you from others in the organization and you need to get Bob some help. You can quickly hire someone and count on Bob to get them up to speed but it will be another month before the new person is proficient. You hope you can survive until then and not lose any more customers…

Fast forward three months. The new guy is OK but he and Bob aren’t getting along well. Bob is a perfectionist that doesn’t want to let go of control and the new guy is frustrated. You think he may quit. You are still getting customer complaints. Wasn’t this hire going to solve the problem? And why is this happening in other departments as well? Will this cycle never end?

What if……three months before this became a problem, you sat down with Bob and a couple of other key employees for just an hour and asked the question, “What would break down if we doubled in volume?”

Questions you might ask include:

1. What should the customer service organization look like with the increased volume?
2. Do we need a Supervisor for this group?
3. Is Bob capable of being the Supervisor and does he even want that role?
4. How can we identify candidates now?
5. At what point will we need to make the hires?
6. What key skills does the hire need to have?
7. What does the training and on-boarding process need to be?
8. How do we make sure this is not felt by our customers?
9. Can our paper tracking system handle the volume or should we look into a CRM?

This kind of planning for growth is critical to the near-term success of the company and the process is also key to building a long-term successful, evolving enterprise. Further, it suggests a different order to your growth decisions.

There are few things as exciting as growing your business, but you must take some time and understand the cost of that growth. I’m not just talking about dollars, although all roads ultimately lead back to that. There are massive impacts to your people, your ability to execute the additional volume, and an opportunity cost to everything you choose. To start down this road without a clear plan risks all that you have built so far.

Using that $1 million investment to fuel manageable growth is far better than throwing money at problems caused by inadequate planning. Now you have a plan for success.