Business Growth – An Interview with Miami CFO Stuart Brown

Stuart Brown joined The CFO Centre in 2019, before this he accumulated more than 20 years of finance experience and has more than ten years’ experience as Country-level CFO for both International and Local Carriers. He has had a lot of success growing businesses he has worked for, so we thought it would be a good idea to ask Stuart for his top tips on scaling up a business:

 

What does growth mean in business?

With growth, what you’re really talking about is growth in sales. You’re acquiring new customers; you’re acquiring new market share. It’s vital to remember the importance of profitable growth. Sales, in and of itself, cannot be the only driver, you’ve got to have sales that are going to be generating positive cashflow and positive future earnings.

 

What is the difference between Organic growth and Acquisition?

Generally speaking, organic growth is business that’s being generated internally. The business is engaging in its working plans, it’s seeking new customers, it’s seeking to acquire that growth based on its existing business. When you talk about acquisition, the business is going out and purchasing a block of business. Sometimes that means actually purchasing another firm, purchasing another company, but it could be purchasing, for example, customer lists or purchasing a client base in some other way.  It’s a growth that is purchased and brought into the existing business rather than growth.

 

Are there different stages of business growth?

Absolutely! When a business is first starting out, that’s referred to as expansion, which is where the business is looking to establish its niche to gain its first customers. A lot of times it revolves around figuring out what works and what doesn’t work and there’ll be a lot of trial and error and mistakes that will be made along the way.

Once the business makes it out of that phase and has established the business model, it is in a classic organic growth phase. That presents a new set of challenges for business owners, because you’re scaling up, you’re moving from perhaps a single location to multiple locations. You’re building out your client base, you’re building out your employee base, and it begins to get out of the scope of perhaps a sole proprietor.

The final stage when you get to maturity is when you have an established market and you have procedures in place, and you know how to operate your business. That then presents a new set of challenges because it’s much more difficult to acquire new customers. Profitable growth is going to come primarily through efficiencies such as controlling expenses. Then as we mentioned before with acquisitions, if the business finds that all of the opportunities for growth have been exhausted, it may look to acquire rivals.

 

What are the main issues that can come up when growing a business?

What happens for a lot of entrepreneurs, in various industries, is that the business starts as a result of a brilliant idea and a sole proprietor can manage it perhaps just in one single location. For example, if it’s a retail store, perhaps they have a single boutique store, but when that store becomes successful and it becomes perhaps 10 stores, that presents more of a challenge because now it’s outside of the scope of that original entrepreneur to manage everything directly. He or she cannot be aware of everything that’s going on across the small stores. That is then the time they need to bring in some management to help them and they need to try to figure out processes and procedures and standardizations to make sure that everybody is operating off of the same set of instructions. As a company continues to grow, that gets to the scope where it’s even too large for a small set of managers and it becomes much more important to have made a driven analysis, professional management and have established procedures for how the business is going to operate.

 

How does a CFO help with any of the stresses of scaling up? How can they help in general with scaling business?

I think CFOs are uniquely positioned to do this and CFOs are accustomed to looking at the world through a financial lens. Understanding how different actions and how different situations will impact the business from a financial point of view. We’re trained to look at things from both the long term and a short-term perspective. Of course, you want to make sure you get your monthly numbers and your quarterly numbers, but you also want to ensure that the business is well positioned for the long term. You want to look at it from a top line and the bottom line. I mentioned earlier about sales, but you also have profits. It’s not good enough to have growth in sales if you’re losing money. You also want to look at it from a cashflow perspective as well as from a P&L perspective. Many times, something that creates a short-term boost on the profit margin may have negative implications for cash and vice versa. A good CFO understands those two situations.

 

What are your three top tips for business owners wanting to scale up?

My first tip would be to focus on the fundamentals. You have to understand your business and understand what the metrics and profit drivers are. The second tip is to trust the advice and to trust the professionals that you have around you. Get good people in, bring in subject matter experts and be willing to let go. Lastly, my third tip is that successful business owners need to have fun with their businesses. When they started their business, it was presumably something that was enjoyable – try to keep it that way!  Make it something that’s fun and fun for everyone that’s working in the business.