Smart Growth for Mid-sized Companies

Mid-sized companies in the United States are thinking positive. As it was found in our survey, the American Express Survey of Mid-Sized Companies1, 44 percent of the 339 decision makers surveyed said they expect their business to grow regardless of the economy, and a similar number, 40 percent, have an even more positive outlook, saying they actually see the economy improving and expanding opportunities for their business. This focus on growth is welcome—but growing right means growing smart.

When putting together a comprehensive growth plan, you may want to focus on reducing costs and mitigating risks. Here are some suggested tactics.

Use Data-Driven Decision Making to Mitigate Risk

Planning for growth without the right data on hand can be unnecessarily risky, so it’s no wonder that a 2014 Deloitte survey of 500 mid-market decision makers found that: “Almost one-third of respondents say they use analytics to influence both business strategy and operational priorities,” and thirty percent of mid-market leaders said they employ analytics for predictive capacity, to forecast and report business results and to shed light on client, customer, or business behavior.”2* Many businesses are leveraging the power of data, but it’s clear from the survey that two-thirds or more respondents may be underestimating the value and power of data.

According to Lee Swinerd3, Director of Turnaround and Transformation at KPMG UK, many mid-sized companies lack adequate data to make informed decisions about the feasibility of growth. Swinerd, who previously established KPMG’s US Restructuring practice and is an expert in cash and capital management, noted that reliable, accurate data is crucial for any successful business.

“In my experience, too many decisions are made on gut feelings,” Swinerd said. “They don’t have quality financial data that tells them what’s not working.” In these cases, Swinerd said, running out of cash is often the first indicator that something’s wrong—and that can be a costly mistake for a business looking to grow.

If your business sees data as just another analytical marketing tool, then you may be missing out on an opportunity to prepare for growth. Harnessing and understanding your business’s data is important for knowing where your money is going, as well as driving process improvements, increasing forecasting accuracy, and increasing management of cash flow.

Invest in the Right Tools to Support Growth
Investing in data-driven technology solutions has proven to be an important strategy for forward-thinking middle market companies4. Being able to analyze data from your supply chain with payables and receivables—among others—can illuminate the strengths and help you identify the weaknesses of your business. You’ll be better able to see where your cash is coming from and where it’s going—important data when preparing for growth initiatives.

Just like a good ERP, having a good Customer Relationship Management (CRM) system is a must. These platforms can collect useful data at different stages of the customer’s engagement with your business, and can promote cash flow by facilitating order processing, tracking of payables and receivables, and collection of payments.

Emerging Tech is Important for Growth
Like big data, investing in technology is important for smart growth. In a 2013 Deloitte survey of middle market information technology executives, 45 percent said their companies were spending more on technology than they had in 20125. The majority of respondents said their organization had already implemented some form of cloud-based service.6 According to the Deloitte study published the following year, that number jumped to 58 percent in 20147. That’s because by using cloud based applications, Software-as-a-service (SAAS), companies can improve productivity and collaboration.8 These solutions can help businesses to scale without some of the costs and risks associated with adding physical data storage and technology infrastructure.

Investing in mobile technology is also important, and companies are taking notice9. The 2013 Deloitte survey found that more than two thirds of mid-sized companies have either developed or are planning to develop a mobile app10. It’s easy to see why; mobile platforms for internal employees can help in managing expenses, tracking fraud alerts, enhancing productivity, and staying connected on the road.

Get Expert Assistance to Avoid Problems

More money can mean more problems. For high growth companies, solving those problems often means seeking outside assistance. One place where it can be beneficial to seek help is in navigating new tax territory, especially if your business is expanding overseas. There are far reaching and evolving tax laws11 that growing businesses need to obey and keep up with, which can be complicated and costly.  

Having a great accounting team and experienced tax attorneys can be a major help when navigating these and other challenges that come with growth, but don’t stop there. Consider bringing in outside auditors. You may have a strong internal finance team, but an independent firm can provide important knowledge as you’re growing—but don’t wait until it’s too late.

Swinerd noted the importance of seeking assistance before situations become dire. “The earlier you reach out to a firm like KPMG, the better off you are,” he said. “Once you’re in crisis territory, you’re operating with one hand tied behind your back.”

The Takeaway
Mid-sized companies may have many opportunities for growth, but too much too soon may damage your business. Ideas to help your growing business include: Placing data at the core of your growth plan, making sure you’ve got the right technology in place, and getting help from the experts before implementing growth initiatives. It may take a little longer and cost a little more up front, but those costs could prove to be a small price to pay if they help your business achieve stable, sustainable scaling.

To find out more about cash flow management, growth strategies, and preparing your business for new challenges, visit business.americanexpress.com.

* The Deloitte survey defines mid-market companies as having annual revenues ranging from $100 million to more than $1 billion.

 

 
Sources
1. The American Express® Survey of Mid-sized Companies was completed online among a sample of 339 financial decision makers in U.S. Mid-Size Companies, defined as having revenues of $5 million to $1 billion annually. Interviewing was conducted by Ebiquity Research between June 2 – 19, 2014.

2. Technology in the Mid-Market: Perspectives and Priorities, Deloitte, page 12 (May 2014)

3. Personal Interview of Lee Swinerd, Director of Turnaround and Transformation at KPMG UK, Conducted by Contently Media LLC, (October 20, 2014)

4. Keeping the Middle Market Growth Engine Humming: Three key growth drivers to consider, Corporate Value Metrics, McGladrey LLP, page 1 (May 2013)

5. Perspectives on Technology, Mobility and the Cloud in the Mid-Market, Deloitte, page 5, (April 26-May 21, 2013)

6. Perspectives on Technology, Mobility and the Cloud in the Mid-Market, Deloitte, page 8, (April 26-May 21, 2013)

7. Technology in the Mid-Market: Perspectives and Priorities, Deloitte, page 5, (May 2014)

8. How to drive innovation and business growth: Leveraging emerging technology for sustainable growth, PricewaterhouseCoopers,  page 8, (2012)

9. How to drive innovation and business growth: Leveraging emerging technology for sustainable growth, PricewaterhouseCoopers, page 2, (2012)

10. Perspectives on Technology, Mobility and the Cloud in the Mid-Market, Deloitte, page 10, (April 26-May 21, 2013)

11. KPMG Highlights 12 Key Business Tax Issues For 2014, KPMG, (December 11, 2013)