*Invest in Infrastructure when Strategy is Pro-Growth

There are many different ways to run a business successfully.    Single operator small businesses need very little support and can generally find all the help they need to operate smoothly by utilizing independent professionals; for these mini-businesses, bookkeepers or accountants may run reports monthly and there might be an occasional visit to a lawyer.  That’s about it.  If you are a sole proprietor without any employees who wants to keep your successful business small and comfortable to manage, you need only consult with professionals as legal, insurance, and investment issues arise.  Enjoy your freedom!

Small businesses that are a bit larger often find daily accounting and administrative tasks to be more challenging.  Proprietors begin to hire staff, one or two at first, and feel squeamish if the numbers of support employees increase.  That’s normal; for a small family business (“mom and pop shop”), it’s the core money-making activity that matters most and there is little margin available for administrative costs.   Still, such companies find that support is, to some extent, necessary.  Without staff, they cannot pay employees or vendors, file workers compensation claims, prepare correspondence and documents, or manage computer problems.  If they attempt to operate without a minimal level of “infrastructure,” the result will be over-worked owners, unhappy customers and, most likely, problems with accounts, licenses, and even government agencies.  Even if a closely held or family owned small business wants to remain small, it must attend to these activities in order to remain viable.

Now, let’s talk about companies that have never been or are no longer “mom and pop shops” and that have made the strategic choice to grow:

Infrastructure is key.  No matter what your type of business or industry sector might be, supporting a vision of growth requires transitioning into an “investor” mindset.  Think of the various support functions of your company and the identified challenges facing your business as components of an investment portfolio:

1) You have the day-to-day ordinary tasks that must be handled (stable, predictable activities).  For this, you need dependable, steady workers who are good at what they do.  To retain them and assure smooth administrative operations, you invest in them by providing training, good pay and benefits, and a positive work culture.

2) You have higher risk exposures that cannot be ignored in a growing business (complex finance and accounting matters, human resources issues, legal causes of action, risk management, contract liabilities, compliance and regulatory issues, sophisticated technology requirements and exposures).  As in an investment portfolio, if there are no moderate or high risk elements, the opportunities for growth are somewhat limited.  To deal with these matters, you must invest in skilled professionals; these are your managers and the people who look out for your business.  As with the steady workers mentioned above, you must develop them, provide competitive compensation and benefits, a positive work culture and…. you must invest time in making them a team.  If the leaders of these high risk “investment” areas of your business are not collaborating with one another, you will have an unbalanced “portfolio” of professionals, a disjunctive group that may find themselves moving in multiple directions.

3)You must invest in systems and service providers:  Technology,  internal communications, consulting support when needed, partnering with insurance, bonding, and investment advisors and outside counsel where appropriate.  No matter how strong your “core” professional staff are, without shoring them up with these resources, they will achieve limited success (there will be missing pieces in your “infrastructure portfolio”).

It’s important to understand your business “model” to make certain that your methods and approach make sense.  If you are committed to growth, infrastructure is key and investment in it is critical.  Of course, depending on the size of your organization and your growth objectives, you can build your company’s infrastructure over time in the same manner that any investment portfolio is created: With consideration given to your risk tolerance and strategy, and with deliberation, lots of planning, reliance on experts, and with the understanding that you have to keep on investing to achieve your goals.


Leave a comment

Your email address will not be published.