Small Business Q&A with Ken Wolfe

On April 1, 2025, Ken Wolfe, CPA, CGMA, President and Managing Principal at Brown Plus, participated as a panelist in the Mind Your Business: Hindsight is 20/20 panel discussion, presented by the West Shore Chamber of Commerce. During the panel Q&A, Ken shared valuable advice to help local business owners manage risk, establish financial controls, track key metrics and plan for scaling to help “future-proof” their businesses. Below is Ken’s Q&A advice for small business owners.

Q: What are the most common risks you see business owners overlook, and how can owners mitigate them?

A: One of the most common risks that I see business owners overlooking is transition planning. Unfortunately, many business owners don’t think far enough ahead when it comes to transition – whether it’s succession, sale or leadership changes. It’s important to start planning early to ensure a smooth transition. It’s also important to consult with experienced professionals as you’re planning, since handling transitions alone can be risky. Transitions involve many different considerations, including banking, accounting, wealth management and legal implications. Bringing in a team of experienced professionals who specialize in different aspects of business transitions can help optimize outcomes.

Another risk I would advise business owners to consider is a lack of diversification. Relying too heavily on a single revenue stream or customer type can be dangerous, as a single legislative change or market shift could put your business at significant risk. Expanding your services and customer base can help safeguard against this risk.

And finally, I find that business owners tend to overlook the opportunity to maximize their business value long-term. If you’re at the point where a sale of your business is imminent, you’ve already passed the opportune window to maximize your business value. If you’re thinking of ever selling at any point in the future, I recommend you consider consulting with a professional now, who can help you structure your business to maximize its value well before going to market.

Q: What financial controls should businesses have in place to protect against fraud or mismanagement?

A:  There are several controls that business owners should have in place to protect against fraud. The first is a clear segregation of duties, to avoid giving any one person too much financial control. Separating responsibilities and implementing proper checks and balances can help deter fraud.

Another simple financial control to implement is owner involvement. Business owners should regularly review their financial reports, even if they aren’t necessarily financially savvy. This will encourage employees who may be considering fraud to reconsider.

I also recommend strengthening your banking relationships, as trusted banking partners can be powerful allies to help you protect against fraud. It’s also a good idea to investigate tools like Positive Pay – a fraud prevention service offered by banks to help protect against check fraud and unauthorized transactions.

Fraud risks are always evolving. Regular employee trainings are crucial to help them learn how to recognize scams and any risks specific to your industry.

And lastly, I cannot state enough the importance of quality hiring. Hiring the cheapest person can still be costly if they aren’t the right fit for the job – either in terms of their skill set or in terms of their work ethic. Even if they cost more to hire, investing in experienced, ethical professionals can help protect the business from financial pitfalls and save the business money in the long run.

Q: What are the key financial and operational metrics business owners should focus on in the early stages of their business?

A: In the early stages, I recommend that business owners focus on three key concepts:

1. Cash is King: Profitability matters, but without cash flow, even a growing business can fail.
2. Bottom Line Focus: Revenue growth is great, but if receivables aren’t collected or cash flow isn’t managed properly, it still won’t sustain the business.
3. Leverage and Debt Management: Borrowing can help fuel growth, but too much leverage increases risk, adds pressure and increases how many bosses you will have to report to, which can significantly limit your flexibility.

Q: When and how should a business consider scaling, and what financial planning should precede that?

A: It’s important for businesses to scale at the right time. There are four key stages to business growth, and each stage requires a different approach to scaling:

1. Start-Up Stage: Focus on validating your business model, acquiring customers and refining your operations.
2. Early Growth Stage: Once revenue and customer demand are growing steadily, you can start to consider scaling. Focus on making sure the business can handle an increase in demand without compromising quality or profitability. Key focus areas in this stage include automation, technology, streamlining processes, expanding your team and ensuring proper financial controls and reporting systems are in place.
3. Expansion Stage: Once your operations are stable, you can start thinking about scaling across new industries, services or markets. Be sure to test the viability of any new markets before committing significant resources.
4. Maturity Stage: Once you’ve successfully diversified across different markets, your focus should turn to optimizing your efficiency, profitability and innovation in order to remain competitive. Scaling at this level may involve strategic acquisitions, partnerships or process improvements rather than rapid expansion.

Premature scaling can majorly strain your operations. Before scaling, make sure you build the right infrastructure, so you have the right team, technology and internal processes in place.

If you as the owner are handling everything, it’s time to scale immediately. Hiring specialized talent in functions like accounting or operations will allow you to delegate those tasks and focus fully on business development.

Q: How can businesses prepare for economic uncertainty or downturns?

A: I mentioned it previously, but businesses can prepare for economic uncertainty by incorporating diversification, to start. Expanding revenue streams or markets can protect against downturns related to a single industry, product or service.

It’s also a good idea to build your cash reserves. Setting aside a few months of operating expenses can help provide a financial cushion against future economic downturns.

If you have the funds to do so, strategically reinvesting in the business’ efficiency, automation and other critical areas can help make the business more resilient.

And lastly, it is crucial to stay informed about market trends and adjust your strategies accordingly. Economic awareness will enable you to plan ahead, so you can avoid overinvesting in hiring, inventory, advertising, etc., if an economic downturn is expected.

Brown Plus provides business owners with an array of advisory services to help them see what’s possible as they continue to grow their businesses. If you’d like to learn more about how we can help your business achieve extraordinary outcomes, please contact an advisor at Brown Plus today.

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