Building a long-term business in a short-term world

In a time where near-instant gratification reigns supreme, it can be easy to forget that starting a business often requires entrepreneurs to slow down and take the long view. In the below post, guest contributor Ty Kiisel, an author with 25 years of experience helping businesses achieve financial success, shares his thoughts on how to build a business that will last.

Cindy

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Most Main Street business owners want to build companies that will become their life’s work—perhaps even a legacy they can pass down to their children. Unlike the get-rich-quick entrepreneurial image often portrayed on television, the idea of starting a business, scaling it, and selling it, only to walk away after a few years, is a foreign concept to many small business owners.

Building a long-term business in a short-term world can be a challenge that requires you to look at your company from a different paradigm. If you want to build a lasting, sustainable business, here are three suggestions:

Focus on manageable growth. I’ve heard many business owners tell me, “Your business is either growing or it’s dying.” It’s difficult to maintain the status quo for long. Growth can be expensive, so thinking long-term requires a business owner to ask some pretty important questions: “How much does my business need to grow to stay competitive?” and “How much growth is too much, in that it might dilute the quality of my product or service, or cause me to act contrary to my business mission?”

It can be challenging to forecast the amount of growth required to keep your business competitive and relevant in the marketplace, but it’s important for you to consider these questions and set expectations that are aligned with your goals. It’s easy to start chasing short-term growth at the expense of long-term viability. Choosing short-term growth over profitability should be a conscious decision you make—not the result of an adrenaline rush.

Remember, investors want ROI. There are two ways to approach capitalizing a business. One way is to pursue investment from outside and the other is to borrow to fuel growth. The method chosen by the small business owner can impact subsequent decisions. Investors are looking down the road at a capital event where they will reap their profits. A lender profits from your regular and timely periodic payments.
There are many companies today that choose to forego profits to rapidly grow, but the expense associated with hyper-growth still requires money to make it happen—cash that needs to come from someplace other than profits, in most cases. Investors look for companies with the potential to exponentially grow with an infusion of capital.Unlike a loan with periodic payments, an investor is likely willing to give a business a few years to grow before they look to capture their profits from investing in your business. Depending upon the level of their investment, they’ll also likely want a seat at the decision-making table so they can make sure your focus is on growth, an exit and big profits with a liquidity event like a sale or public offering.

There’s nothing wrong with this approach; it’s built good businesses and made more than a few entrepreneurs very wealthy over the years. What’s more, it might be tempting if you’ve got big ideas that require a lot of capital, and even a good idea if you need to grow quickly to remain viable and relevant. Nevertheless, there are also options beyond investor capital to fuel manageable long-term growth.

With borrowed capital, the relationship your business has with a lender is straightforward and based upon how well you’re able to make periodic loan payments. And, you won’t be required to give up ownership equity or a seat at the table to an investor who might have different goals and objectives than you.

Consider the long-term consequences of the decisions you make today. There’s a difference between making decisions you know you’re going to have to live with five, 10 or 20 years down the road. Building a long-term business in a short-term world requires you to make what I call “10-year decisions.
”It can be tempting to make decisions today that might carry negative consequences in the future if you know you’re likely not going to have to deal with them. What’s more, putting off solving a future issue by kicking the proverbial can down the road may help increase short-term profits, but might negatively impact long-term business sustainability. Taking the time to consider long-term consequences for the decision you make today is an important part of building a long-term business.

Building and sustaining a business for the long term requires business owners to ignore the popular entrepreneurial myths perpetuated on television. In other words, a successful business or successful entrepreneur doesn’t necessarily require a lot of venture capital and an exit. Many highly successful entrepreneurs take the long view and make building their companies their life’s work.

Ty Kiisel is a contributing author focusing on small business financing at OnDeck, a technology company solving small business’s biggest challenge: access to capital. With over 25 years of experience in the trenches of small business, Ty shares personal experiences and valuable tips to help small business owners become more financially responsible. OnDeck can also be found on Facebook and Twitter.

 

 

 

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