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If you want to scale up your business and make it a success, you should begin by asking yourself a couple of tough questions about your company’s capability and its capacity to deal with growth. This is not the time for egos and optimism; it’s time for honest reflection. You need to get a clear perspective on your current position. Many entrepreneurs tell us that they find this hard. They’re too close to their businesses and that means they don’t have the perspective to assess the situation clearly. To overcome this, you could consider turning to a trusted professional, like a CFO, or you might have a business mentor or coach who can give you dispassionate advice.

Before you begin scaling your business, these are the 2 tough questions that every entrepreneur should ask:

1. Is your company capable of growing? Are you and the employees in your company capable of dealing with a growing amount of work or sales and of doing it cost-effectively? What happens if your company achieves exponential growth? Will your costs rise exponentially as a result?
2. Does your company have the capacity to deal with growth? Can your business systems, employees, and infrastructure scale up fast to meet demand? For instance, if you get a sudden surge in orders, will your company be able to cope? Will you be still able to manufacture and deliver products or services on time? Do you have enough employees to deal with a surge in work or sales?

As you scale up your business, it’s really important that your quality and performance stay the same. You’ve built a reputation for delivering a certain standard and you don’t want to lose that by scaling up without robust plans in place. You also don’t want to run out of money because your rapid growth hits your cash flow.

Once you’ve finished your review, it’s time for you to work out which of the 7 factors for a successful business scale-up you’re going to need. Investing in the preparation stage is the key to success – when you get this right, you can scale up rapidly and meet your goals. Remember to keep sight of your personal goals (what we call the Numbers That Really Matter), as well as your targets for your business. At The CFO Centre, we have a passion for helping clients balance what’s important to feel accomplished both in their work and as humans.

You can see that you are going to need some careful planning and some funding to scale your business. You’ll also need to have the right systems, processes, technology, staff, finance, and even partners in place. If this sounds a bit daunting, don’t worry! Our CFOs have shared their incredible wealth of knowledge and experience so we can provide you with the 7 factors that they find in all effective business scale-ups.

1. Identify the gaps in your processes

You need to audit your business processes (core processes, support processes, and management processes) to find their strengths and weaknesses. Find the process gaps and address them before you start to scale up.

Keep the processes simple and straightforward. Remember that complex processes slow things down and hinder progress.

2. How will you boost sales when you scale up?

Ask yourself what your company needs to do to increase sales. How many new customers will you need to meet your scaled-up goals?

Create a sales growth forecast that details the number of new clients you need, the orders, and the revenue you want to generate.

Examine your existing sales structure and decide if it can generate more sales. Can you increase your flow of leads? Do you need to offer different products or services? Is there an untapped market? Do you have a marketing system to track and manage leads? Is your sales team capable of following up and closing more leads?

Make sure you have enough staff to cope with an increase in sales. If you don’t have enough staff, consider hiring new employees, outsourcing tasks, or finding partners that may be able to handle functions more efficiently than your company.

3. Forecast scaling up costs as accurately as possible

Once you’ve done the sales growth forecast, create an expense forecast. This should include the new technology, employees, infrastructure, and systems you’ll need so you are ready to handle the new sales orders. The more detailed your cost estimates, the more realistic your plan will be.

4. Get funding to cover your business expansion

If you need to hire more staff, install new technology, add facilities or equipment, and create new reporting systems, you’ll need money to invest. If you don’t have enough reserves to do this then you need to find money another way. Check out our helpful article if you aren’t sure how to fund your company’s growth.

5. Make delighting customers a priority

To reach your sales forecasts, your company will need loyal customers. You’ll win their loyalty by delivering outstanding products or services and customer service every time you interact with them. Don’t let scaling up reduce your quality.

6. Invest in the right technology

As you scale up, you and your team will find that manual tasks become overwhelming. If you leap from processing 5 website sales each day (for example) to 5 sales per hour, your employees will quickly get overwhelmed. You need to be ready to invest in technology that will automate tasks and you need to allow enough time to find the technology, migrate from your old system and train your team. In the end, all businesses depend on automation to bring costs down and make production more efficient.

Another important point in this area is integrating technology. You can have the best systems in the world but your business will struggle to thrive if they aren’t integrated. You need robust, scaleable systems that work smoothly together.

7. Successful scale-up is hard – ask for help

Don’t be afraid to ask for help from experts who have experience in scaling up companies. We love this quote from an interview with Apple’s co-founder, Steve Jobs. He said,

“I’ve never found anybody who didn’t want to help me when I’ve asked them for help.”

“I’ve never found anyone who’s said no or hung up the phone when I called – I just asked.”

“Most people never pick up the phone and call; most people never ask. And that’s what separates, sometimes, the people that do things from the people that just dream about them. You gotta act. And you’ve gotta be willing to fail; you gotta be ready to crash and burn, with people on the phone, with starting a company, with whatever. If you’re afraid of failing, you won’t get very far.”

You can ask a high-profile entrepreneur for help, turn to a trusted mentor or recruit a part-time CFO to sit beside you. Whatever you choose, you will need a supportive, non-judgmental partner. A person who will help you develop a forward-looking, scale-up strategy that delivers the right numbers so your business can grow and fulfil your aspirations.

Find out how an experienced scaling-up CFO can help you

Would you like a chance to talk to someone who understands exactly how to de-risk your scale-up? We’re pretty sure the answer is “yes” so why not book a no-obligation, 30-minute discovery call with one of our expert CFOs?

Simply give us a call on 1800 937 097 and let our in-house team know that you’re looking to scale up your business. They’ll book your call and help you get your journey to success underway.

The use of management dashboards to monitor management KPIs, metrics, and other essential data points will allow you and your management team to make rapid, data-based decisions based on up-to-date information about your business.

A management dashboard provides you with a comprehensive snapshot of the company’s performance. This is critical since it condenses massive amounts of information into a one-page summary that can provide invaluable insight into the health of your company and help with executive decision-making.

It allows you and your managers to access the most relevant information instantly.

The data is represented graphically using tables, line charts, bar charts, sparklines, maps, or gauges so you and other users can see the information at a glance.

They also allow you and other users to drill down to investigate further if necessary.

Types of business dashboards

There are three types of business dashboards:

• Operational dashboards which emphasise monitoring. These reflect the business processes and help monitor KPIs.
• Strategic dashboards which emphasise management. They reflect the end status of a KPI or metric for a set period.
• Tactical dashboards that highlight analysis. They will help you to identify trends and to track how metrics have changed.

Finance dashboard

Your finance dashboard should offer a summary and interpretation of key aspects such as profit and loss, and cash management.

Sales and Marketing dashboard

Your marketing dashboard should provide insight into how successful the company’s marketing efforts are at generating sales and attracting and retaining customers. You should be able to see where people are getting ‘stuck’ in your sales funnel or pipeline.

Risk management dashboard

Your operation and safety dashboard should help you and your team to manage and prevent risk. It could include training and awareness, incident management, claims, compliance, risks for assets and projects, and hazard identification.

HR dashboard

Your HR dashboard should provide reports on internal metrics such as employee satisfaction as well as external metrics such as your company’s success rates for recruitment. Depending on the size of the organisation, it could also be used to track turnover and retention rates.

The benefits of using management dashboards

• Instant access to core business metrics

Users across your organisation will be able to access core business metrics.

• Consolidate data from across multiple analytic services

The management dashboard consolidates data from many data points in an organisation to provide one reporting interface. It will save time and effort typically spent on compiling reports, signing into different analytic services and then sharing the data to everyone in the company.

• Provide real-time updates

Since changes in data or values is reflected in dashboards, you can identify fluctuations in crucial business metrics when they happen rather than having to wait for daily or weekly reports.

• Align departments

Dashboards can provide metrics that are relevant to each department.

• Allow root cause analysis

If you spot unusual trends in your summary reports, you can drill down to find their root cause.

• Communicate and manage strategy

Dashboards can be used as agents to boost organisational change.

How to design the best dashboard

A well-designed dashboard will help improve your company’s productivity and save time, but a badly-designed dashboard will confuse users and challenging to share. It needs to be easy to use and to report the most meaningful data and insights.

That’s why it’s critical that you select the right metrics to display. Avoid the temptation to add as many metrics as you can. If you need to monitor lots of metrics, use dashboard tabs.

Keep the design simple to make it easier for people to read and to digest the information. Avoid using too many colours or fonts or different graphics. Group data in a way that’s relevant and which provides context.

To encourage as broad a range of users as possible, make the dashboard interactive with options to filter and drill down.

Decide the reporting frequency based on the type of dashboard you’re using. For example, structure operational dashboards so they provide daily reports and set up strategic dashboards to give a monthly or quarterly report.

Find out more ➜

Using sound management reporting and project by project accounting would make it easier for construction companies to get funding from banks and other financial institutions to grow and scale their businesses, says Simon Parkins, a construction industry accounting specialist.

Many construction businesses don’t invest in good management information, says Simon, who has over 20 years of experience in the construction sector and who is now a part-time CFO with The CFO Centre.

Instead of making informed decisions about how to run the business based on facts, Managing Directors and their boards tend to rely too much on gut instinct, he says. That makes banks and other financial institutions wary.

Why banks and financial institutions don’t like construction companies

Getting access to external finance has always been challenging for construction companies because it’s perceived to be a very high-risk sector, says Simon.

The collapse of construction giant Carillion with £7bn debts in 2020 has made lenders even more cautious about providing funds to companies within the sector.

“Carillion going bust made it even more difficult than it already was,” he says. “There were already banks who would not touch construction clients, but now even the ones who were open to construction companies have put a lot more hoops in place for them to jump through.”

SME construction companies are not particularly good at investing in management information or accounting software that’s suitable for the industry, so they are often the first things Simon recommends they do.

Having access to the banks and financial institutions that will lend to construction companies, and knowing what assurance and MI they want to keep that lending position in place, is really crucial.

“I’ve got connections with some really good lenders who are not put off by construction, and they’ll improve their rates and fees on the basis that The CFO Centre is involved,” Simon says. “They know that we will ensure that the management information they need is there.”

“A lot of construction companies simply do not understand what the banks need to get finance, which is where we can help.”

Another reason why lenders find construction companies less appealing than other businesses is that the profit margins are often quite low.

Many of the top construction companies work with tiny margins of 4% to 5%, while SME construction companies are more likely to have margins of between 10% and 25%.

Using project by project accounting practices

Many SME construction companies fail to put project by project reporting into place. This results in poor MI for the business, but also in an erratically performing profit and loss position, which scares lenders.

“A bookkeeper or accountant will put together management accounts for the business, but they often report on the whole business and not on individual and distinct projects.”

“The key to success in construction is really understanding project by project performance, so you can see which ones are performing, which ones are not, and which ones contain the risk. Doing that brings the performance of the business into clear focus,” he says.

“I worked with one client with a Commercial Director who the Managing Director regarded as performing quite well. He was delivering reasonable but not great numbers, but there was no transparency to what he was saying at the monthly board meetings. When we put project by project reporting into place, he had nowhere to hide. He was found to be deficient and covering up lots of problems and issues from the Managing Director.”

“Within four months of me coming on board as a part-time CFO, the Commercial Director went from a position of nearly being assigned share options and some ownership of the company to the point where it was revealed he was fundamentally underperforming and probably losing that business something in the region of £100k to £150k a month.”

Construction accounting is very different from standard accounting and many good accountants get it wrong when tackling construction accounts for the first time, says Simon.

“As accountants, traditionally, we take the ledgers, we adjust for income not recorded (bringing in work in progress) and then we adjust for missing cost (accruals). Do this for a construction company without looking at individual project performance at your peril.”

“Traditional accounting in this way is problematic, and the following issues were common to the majority of construction SME clients I have worked with:

• Making income and cost adjustments without looking at individual project performance means there is no sense to check/validate the adjustments being made.
• The majority of risk tends to materialise or manifest itself at the end of a construction project, and so you need a system of reporting that reflects this risk and adjusts accordingly.
• The ability of the business to forecast the expected margin at the end of each project is often poor to moderate.

Clients believe that when they bring the income and cost adjustments together, the accounts will be accurate. What you tend to find is that income is optimistic and overstated and that not all outstanding costs are identified. Coupled with poor visibility of the likely financial outcome of the project, and no consideration for risk, the accounting profit tends to be overstated.”

Too few construction companies allow for the problems that inevitably occur during a project.

“Nine times out of ten, profit-related things go wrong at the end of the construction project. There might be:

• Liquidated damages where you’re actually on penalty clauses to finish the project on time,
• Remedial works, an ongoing obligation to fix any subsequent problems which materialise with the work you’ve carried out,
• Snagging at the end of a job is when the client will point out problems with the work,
• Many companies underestimate the amount of work required to fulfill the snagging list for the client to be 100% happy.”

“It’s also just an industry in which people haggle at the end of the job.”

It’s for all these reasons that Simon tries to persuade clients to hold back some of the profit.

“I tell them to beware of ever taking the full margin until the client has signed the project off and physically paid the bill.”

While big construction companies have the systems and processes to put that all into place, many SMEs don’t have the knowledge or resources to do these things properly.

They might have accountants or bookkeepers, but they often do not understand well enough how to allow for how the construction industry works.

“It’s quite hard for an accountant without construction experience to know what to do or to understand the risks involved in construction,” he says.

“I have worked with many of the blue-chip companies in the construction sector for the past 20 years, and there are lots that I’ve learned along the way. A finance director in construction cannot sit in an ivory tower playing with spreadsheets. You’ve really got to understand project performance and how things are going on operationally.”

One client has a Commercial Director who was advising the monthly unbilled income figure and working with the accountant on the missing cost figure. They were adamant that the adjustments they were making were correct. But they had no mechanism for sense checking whether the adjustments were logical when bought together in the accounts. By introducing project by project reporting Simon showed them that their adjustments were very often incorrect. On one project they were reporting a 75% margin, on a project they were forecasting would make 35%. Moreover, the forecast proved to be inaccurate, and by the time the job was complete the actual margin achieved was 23%. With the job not even halfway completed they were already taking £250K profit on a job that ultimately only made £130K, and yet they were 100% convinced that what they were reporting was accurate.

Why construction companies need external funding

Much of the work construction companies do initially is self-financed with extended payment terms and that can put pressure on cash flow.

Projects can also go into a dispute which means cash flow can stop altogether.

“I had a client with a modest annual turnover of £6m who got into a dispute with a customer who then withheld a massive £1.2m. The work was delivered, but the £1.2m was withheld because a single piece of paperwork wasn’t delivered by a deadline.”

Many of Simons’ clients are SMEs who are working on four to eight live projects at any one time and are therefore highly exposed to each client.

“Their clients can quite often just withhold money on a pure technicality. The amount of cash they need for business operations hasn’t changed but their expected cash inflows can suddenly dry up. It is a difficult sector from that point of view.”

It’s therefore often a good idea for the construction company to have lending facilities on standby as a contingency to cope with any issues that may materialise. Approaching the bank, at short notice and with an urgent need for funds is rarely easy of a successful conversation.

If you’re a construction business needing some help/advice on getting external funding, reach out to us today at [email protected] and one of the team will be able to book a call with one of our dedicated Regional Directors to discuss more.

We are delighted to announce The CFO Centre Ireland has been named as Galway Chamber’s “Business of the Week”. Galway Chamber is a premier business organisation based in Galway City and its hinterland. They currently represent approximately 500 companies, and is a privately constituted organisation that works for the interests of businesses, and for the economic development of the City and Region.

Regional Director Milo Molloy represented The CFO Centre and spoke to Galway Chamber about the company and his thoughts on living in such an innovative city.

When asked what motivates you? Milo said, “One of the clients that we work with, recently said that their business has survived because they took on a part-time CFO, and she was sorry she hadn’t done it sooner; that is very satisfying to hear.” This is our aim at The CFO Centre; to build a relationship with our clients that makes a real difference.

If you are interested to learn more about how a part-time CFO can help your business please call: 1800 937 097.