Business longevity doesn’t necessarily mean working to ensure a company exists beyond first-generation ownership. Rather, the meaning of longevity depends on the goals of ownership.
“Sometimes a business was mainly created to provide wealth for the owner, so longevity could mean staying profitable long enough to realize a successful sale,” says Joe McNeill, senior vice president and Medina market team lead at Westfield Bank.
However, he says business owners do change their minds.
“Owners sometimes realize the importance of the business to their employees and their employees’ families. Whatever the original goal, they sometimes end up taking personal responsibility to make the business successful so that it can continue to exist and provide for the people who work for them for years to come.”
Smart Business spoke with McNeill about defining longevity and how to achieve it.
How do owners/founders determine what longevity means to them?
Longevity has a constantly evolving definition. A business could be created just to fill a need, for personal reasons such as to support a family, to fill a need in the market that isn’t being met, or it could just be a passion project — to start a business that makes the world a better place.
For some owners, the business becomes part of their purpose. They can become passionate about helping and being there for their customers and often feel a responsibility to support the company’s employees and their families. The goal, then, becomes ensuring the business lasts as long as possible because they feel that others are depending on its success.
What is the strategy behind longevity?
Successful business owners commit to their vision for the company and to their employees. A business can only last if there’s an investment in people. Then the vision needs to be communicated to those employees and a road map created with the mile markers to success clearly indicated.
Longevity also means not growing too quickly. Controlled growth is preferred. Develop a steady stream of revenue and have a good customer base. It’s natural to want to keep growing, but that should be done through planning and establishing a manageable pace.
What are the landmark stages of a business, and how do a company’s capital needs change through those stages?
The startup stage is the riskiest time for a business. Every decision is critical. At this stage, raising capital can be tough because the value of the business is based almost entirely on an idea and the owners’ experience.
The growth stage is next. Here, owners are required to carefully manage the company’s bottom line. It takes lots of planning and forecasting, and a solid foundation in place on which to grow. It’s also when financing comes into play. Owners would be wise to tap into their banker for advice when it comes to planning and forecasting capital needs, something that’s critical during this phase.
The next stage is expansion. That could mean expansion in terms of geography, products and services, production, or workforce. At this stage, having key people in place is very important.
After expansion is the maturity stage where a company is either sold or passed on to the next generation. When this happens, a company can move into another growth phase, typically because the next generation of ownership is eager to expand the business. Here, banks can provide significant help aligning a company’s capital needs with its goals.
How can banks help owners achieve their business longevity goals?
A banker can offer an outside perspective on ways to grow, such as through a well-timed acquisition or an influx of working capital. From a financing and financial statement management perspective, bankers can get into the numbers and help owners put them into a bigger-picture context to better navigate growth and slowdown periods.
Bankers are in a position to stand back, look at the business from the outside and offer a fresh perspective. They can help owners assemble and execute a step-by-step game plan to achieve their goals and bring success to any stage of business.
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