For Entrepreneurs And Small Business Owners: How To Avoid Six Big Business Expansion Mistakes
Family owned businesses are one of the largest growing employment segments of the U.S economy according to the U.S. Small Business Association. Fifty percent of the gross national product is generated by these companies – some of them quite large and publicly traded on the New York Stock Exchange.
In Canada, according to RBC Royal Bank, there are more than 821,000 women entrepreneurs in Canada, who annually contribute in excess of $18 billion to Canada's economy. This entrepreneurial market trend is growing in all segments of the economy.
One of the largest issues facing family owned businesses and entrepreneurial start-ups, however, is succession leadership and passing the baton from one generation to the next. If you are next in line or at the helm of a family owned business here are some pitfalls to avoid as you search for investment capital to expand your operations.
1. You can jeopardize your capital position by selling more preferred stock to raise money at a lower price than the initial offering. Your second release of stock should cost more.
2. The best time to raise money is when you do not need it. Maintain adequate reserve funds. If you have money, it is easier to raise more.
3. The more shareholders you have the harder it is to keep everyone on the same page. Sell as few blocks of stock as you can.
4. Keep your board small and put them through a core values and culture process as part of your long range planning. It is very hard to remove someone from your board.
5. As you grow your company, you must accept that it will have to be reinvented through each major growth phase. The core strengths you start with can end up being a liability when you strive to systemize your operations. For example, a directive leadership style with a seat of the pants ability to get things does not work well when operations must be systemized. Many start-ups and family owned businesses out grow the founder very quickly … until the next creative growth phase.
6. Once you have acquired venture capital you have sold your company. Still repayment terms are sometimes impossible to pay off. Make sure you engineer your exit strategy when you secure venture capital funding to avoid the unfortunate boot.
From a consultant’s perspective, all too frequently core values and culture are ignored from the board room to front line services. Whether building your founding team, purchasing a new business, building the one you have or selling, values and culture bring balance to your team and work strategies.