Who will throw a lifebelt to the gazelles?
These weeks, we celebrate the leading gazelle growth companies, applauding them as the job creators of tomorrow. But who should throw a lifebelt to the many gazelle companies that are risking their lives during the difficult journey from entrepreneur to a real growth engine? Inadequate finance management in particular is often to blame when gazelles go under.
Once sales pick up, and the customers start pulling the company’s products off the shelf, the director’s growth aspirations and ambitions on behalf of the organization typically know no bounds. This is often the time when the cracks begin to appear, because the business set-up usually does not develop at the same growth rate – and when growth companies fail it is usually not due to lagging sales or poor product quality but due to poor finance management and a lack of attention on the company’s cash flow.
Therefore, society has an important mission in supporting this segment of future growth generators and doing whatever we can to keep them afloat. As a society, we have to keep prodding them to make sure that they manage the potential of the company and its products as efficiently as possible. With a decreasing number of serious entrepreneurs, Denmark cannot afford to lose potential growth companies to relatively simple mistakes.
One solution is to build a culture in the growth companies where they pause from time to time to take a long, hard look at whether their financial management is in place, whether they are using the right systems and using them properly, whether the company develops the employees’ competences and recruits the right people, and whether the internal procedures for handling orders, customer relations and suppliers are fully optimized.
Here, a competent board plays a key role. The board needs to put all these issues on the agenda – and it needs to follow up continuously to ensure that the company is fine-tuned to handle a growth process without springing a leak and going under. The board has to ask these relevant questions of the daily management to ascertain whether the structure is in place for achieving ambitious goals, matching the budget to the strategy and keeping a close watch on the balance between costs and earnings.
Many entrepreneurs have an impressive knack for spotting market opportunities and going where the money is. Unfortunately, they often view finance management and other aspects of business management as pure costs. However, once they need to manage 30 or 50 employees, they have to build the right structures and systematic processes to maintain control – and thus enhance the company’s chances of survival.
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