How-To: Growing your small business past the startup phase

For small businesses, making it through the start up phase, or the “Valley of Death,” as many entrepreneurs call it, is just the beginning.

Next comes bridging the gap between start up and full-fledged company with a functioning infrastructure – both physical and management-wise.

It’s a challenge with which many young businesses wrestle, says Matthew Saunders, Business Development Supervisor for Ryerson’s Digital Media Zone tech incubator.

Saunders says the transition often requires help from professional, experienced management to properly build and scale the various aspects of a business – be it sales and marketing, research and development or leadership.

“That’s always a challenge for entrepreneurs leaving the start-up stage,” he says, adding that hiring a consultant, coach or small business advisor can make the transition easier.

Saunders says one of the biggest challenges faced by the rapidly-expanding companies he works with is leasing office space.

Cliff Ritter, owner of search engine optimization company Critter Search, had very specific office needs as his business grew.

“We went from having one server in my office in 2009 to two in-house, two at 151 (a server storage space that also houses Google), one in England and one in Florida – so we can cover our customer base in North America and Europe,” he says. “We didn’t have the structure or the bandwidth or even the people to have had that set up from day one.”

But looking for a new space has difficulties of its own.

“The main challenge (is) trying to plan for the future while not leasing a space that was far too big for (your) needs,” adds Ritter.

Critter Search started small, with only three staff, in a leased space above a storefront.

Now, with 12 employees, it has since moved into a larger, proper office space in Toronto.

“We’re almost full here now too, but it’s a good problem to have,” says Ritter.

His role at the company is also in near constant flux, a byproduct of the growth associated with moving beyond the startup phase. Many small business owners – especially in the tech and marketing sphere – find their position consistently slipping from hands-on work to more administrative and strategic duties.

Larry Wasser, Vice-Chairman of Genuity Fund Management – a Toronto investment management company – and Entrepreneur in Residence at the University of Toronto’s Rotman School of Management, says it’s crucial for founders to recognize when their work may actually be hindering a company’s growth.

“They might have the skills to take it to the five-year level, but after that they need to bring in professional management,” he says.

Often marketing and customer acquisition are the focus for small businesses in the early stages, says Wasser, adding that while this may be the best way to gain traction and sales, “the tendency is to neglect having the proper systems in place to manage growth.”

“Having the right people and team in place who are able to manage that upward trajectory will allow the entrepreneurial founders to concentrate on executing the vision, while at the same employing the proper financial controls to manage critical issues such as cash flow,” he says.

Success also comes down to the right funding.

“Capital raising, necessary to fuel future growth, will be far easier to achieve if the company has been diligent in structure, people and systems,” he says.

There are very few problems that can’t be overcome with a solid cash-flow, adds Wasser, and having a strong internal infrastructure is especially important in the high-growth tech field, where innovative staff are in very short supply.

Ritter agrees, saying staff are vital for growth at every business stage. He credits timing with his ability to find innovative young employees.

“I started Critter when the global economy was collapsing. Because of that downturn I was able to recruit some phenomenal staff,” he says.

His future plans still largely hinge on Critter Search’s staff, but he’s also looking to  the company infrastructure to ensure growth continues.

“I have brought in a senior sales manager to start pitching more, larger clients,” says Ritter. “We have also upgraded our in-house tools to deliver services, which has really made us stronger and (led to) a much greater competitive advantage over other agencies in Toronto.”