Time to Transition: Going from Small Business to Big Business

by Sean Ross

2 min read

Most business owners want to grow their companies, but it’s possible to have too much of a good thing. A business that grows faster than its infrastructure or cash flow can become error-prone at precisely the moment when it’s really making a name for itself. If you think there’s a chance that your business might skyrocket, you should look to improve your planning and level of sophistication before the company kicks into another gear.

How to Know When Your Business Gets Big

Many agencies and research organizations define company size in terms of annual revenue. Others define big business in terms of employees; Industry Canada, for example, says that 100 employees or fewer is small, 101 to 400 is medium-sized, and 500 or more is large. According to December 2015 data, there were approximately 21,500 medium-sized businesses and 3,000 large businesses in Canada. For most business owners, however, the idea of having 100 or 250 employees seems very big indeed. Companies of that size still deal with issues that a 10-person firm may not have.

Growing Businesses Face New Human Capital Challenges

On some level, all businesses deal with the same issues – the need for easy and accurate bookkeeping and invoicing, for instance – but rapidly growing businesses face unique struggles. For example, small businesses can often get by without a fully fleshed-out human resources department or payroll manager. Many don’t need to offer a sophisticated benefits package or hire in-house legal counsel. In a small business, the owner or chief executive officer often handles the entire hiring process; big businesses can’t get away with that. If you want to grow your business without losing your focus or sense of control, you’ll probably need to bring in some additional help.

Taxes, Regulations, and Funding

If you are already tired of taxes and regulations on your company, get ready for even more of the same as you expand. If you think you’ll grow enough to eventually take your business public, remember that public corporations are subject to much more restrictive guidelines than private or closely held companies in Canada. If you expand into foreign markets – the United States, for example – then you’ll need to become familiar with another set of regulatory authorities. Bigger businesses face different income tax requirements, receive fewer deductions, are eligible for fewer grants or special assistance programs, and are more likely to run into legal disputes (just based on the law of averages). As an owner or executive, you also need to be aware that your own personal income taxes may change. Big businesses also need established relationships with lenders and investors. Cash flow and accounts receivable can be difficult enough for companies with a lot of working capital and wage expenses, but expanding operations often requires huge new capital raises. Try to establish these relationships or plan for new funding opportunities before they become necessary. Being a good enough business operator that you need to worry about growing too fast is a good problem to have. You can set yourself up for even more success by considering the kinds of organizational and structural changes you’ll need in place to accommodate that growth.

References & Resources

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