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Handling the challenges of a growing business

Updated: July 25, 2013 - 11:52 am

Posted: July 19, 2013

By Bill Cresenzo

bill.cresenzo@insidebiz.com

As the president and CEO of TowneBank, Bob Aston has a bird's-eye view of the challenges that growing businesses face.

He is a co-founder of the bank, which opened in 1999 with $49 million in startup money and three branches. And the bank deals with small businesses every day.

Fourteen years later, TowneBank is number one in market share in community banks in Hampton Roads and has $4.3 billion in assets.

Entrepreneur Magazine said that in 2012, the number of small businesses topped 27 million and accounted for up to 80 percent of all jobs created in the U.S.

Starting a small business is one thing.

Putting it on a path for growth is another.

"The most critical element is getting all the right people on the team and having a cohesive culture," Aston said. "When you combine culture with talent, it will propel a company forward, no matter what line of business you may be in."

The second most critical element, Aston said, is keeping a close eye on capital and receivables.

"Working capital in the company needs to keep pace with growth," Aston said. "What we see on the lending side of the business is that companies that experience rapid growth don't pay enough to attention to that."

Jim Carroll, executive director of the Hampton Roads Small Business Development Center and vice president of small business for the Hampton Roads Chamber of Commerce, said it's critical for businesses to monitor their cash flow.

"If you sell your product in January and you're not getting paid until May, who's going to pay the bills in the interim?" Carroll said. "If you watch the receivables, you don't want them to get old and there are times when you really have to be a pain in the neck and make people pay you."

Stephen E. Lanivich, assistant professor of management and entrepreneurship at Old Dominion University's

College of Business and Public Administration, warns that stockpiling resources can create a buffer, but has its downside.

"Coping with uncertainty is tricky," he said. "Maintaining a resource stockpile has costs. For small businesses without vast amounts of capital to devote to a tangible uncertainty buffer, the intangible information resource route is advisable.

"Many small business owners are busy with their nose to the grindstone," Lanivich said. "So, when they finally look up and say, 'I want to grow!' they might not have adequate information or other resources regarding potential opportunities for growth. Such resources are not always readily apparent, and can require search.

"For other small businesses, expansion beyond the initial business concept can make economic sense, but falls outside of the founder's scope or passion. Again, uncertainty is the issue."

That's why it's important to hire the right people, Carroll said.

Business owners who start out small might have the skill sets to sell a product or service, but not the skills to actually run the business.

"You can only take it to a certain point," Carroll said. "You may need an HR department, you may need an in-house attorney. It takes an entirely different set of skills running a startup company compared to running or managing a growing company."

"The biggest mistake a small business owner can make when trying to grow is ignoring the process that grew their business to its current state," Lanivich said. "Business growth should be conceptualized as a new venture. As it is, in effect, something new about the business."

Jeff McWaters, a Virginia senator and the founder of managed care company Amerigroup, a Fortune 500 company in Virginia Beach that was sold to WellPoint in Indianapolis for more than $4 billion, offers these tips for small businesses:

* Have a clear vision. McWaters said it's important to "keep your eyes on the clear blue flame," referring to the flames that come out of the backs of F-18 jets. The jets have a very specific destination and mission and so should a business.

* Each day, have a success that can be measurable. Ask, "Are we a better company today than we were yesterday?"

* Learn from mistakes, but don't dwell on them. Exercise calculated risk.

* Make sure that processes are in place. While it's important to be creative and entrepreneurial, if the practical building blocks aren't in place, the company will falter.

"If the operation of the company is running poorly, it's hard to be creative, because your phone is ringing off the hook because your customers aren't happy," McWaters said.

* Treat vendors well, not just as someone you pay, but as people who can make your business better.

* Look and think bigger than you are. When McWaters started an insurance business, he labeled his only company vehicle as "vehicle number 3." Not to deceive people, he said, but "it was an important perception we wanted to create for people. We acted like a big company."

* Pray and look to your family for support. nib

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