A client recently asked me to help her analyze the overall state of her company. Her decision to conduct this productivity audit was prompted by an unexpected personal opportunity that would take her out of the country for the better part of a year. For continuity and efficiency reasons, and to make sure her managers had their marching orders throughout her absence, my client wanted to make sure she was “doing things” as well as possible.
As it turns out, she wasn’t. She was doing great, no doubt; but she wasn’t operating as efficiently and productively as possible. The subject business, a relatively straightforward, mom-and-pop, retail operation, had just shy of two million dollars of annual sales. Yet this successful enterprise was formally divided among six (yes, six!) separate corporate entities. Inexplicably, each entity’s performance was tracked on a different fiscal year. Over its ten year existence, this family of companies had bootstrapped itself to sustainable success. It had built a strong, loyal community around its brand and it had managed to stick to its business and social principles along the way.
But unfortunately, it had never developed a consistent, reliable budgeting process. It had never developed the policies and processes through which to measure its success and identify its problems. And, as it turns out, it had never considered its burdensome overall corporate structure. When I tried to find out how they got to six separate companies for a business this size, I discovered that the multiple entities had been set up to facilitate future outside investment that was never actually needed (thanks to my client’s self-made success). Nonetheless, these entities continued to file and pay taxes separately, continued to demand strict corporate record-keeping, and continued to stymie any effort to answer the simple question, “how are we doing?” Perhaps most important, this more-complicated-than-necessary superstructure made regular, company-wide forecasting and reporting all but impossible.
In the early days of a startup company, decisions are made out of excitement, optimism, and big dreams. But the sometimes ad hoc decisions made early on in your company’s life can have lasting consequences unless they’re revisited. As your business matures and its needs change, the decisions you made early on may no longer be appropriate and could actually be impairing your productivity. The good news is that they’re not set in stone.
About The Guest Author: Andrew R. Levinson, is the Managing Director of Riverside Strategic Advisors LLC, a business consulting and commercial mediation firm located in New York. He can be reached at email@example.com.