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Pitfalls to Avoid When Growing Your Business

A strong economy drives business growth. I think most of us can agree on that. Growth is usually good…

But if it is not controlled growth, it simply will not be sustainable.

In this blog, I outline several pitfalls to avoid when growing your business (especially in a high growth scenario). It’s all about managing the growth properly.

We have two current clients that are experiencing high growth, and they can barely make payroll.

With a pipeline of huge sales, how can this be possible…?

Their lack of planning on systems and procedures has also caused the management to not sleep well at night.

SCFO Lab Members: The reason most income statement projections fail is because of a lack of ability to accurately project sales! Start the Sales Genie EP now.

What Happens in a High Growth Scenario?

So, what happens in a high growth scenario? It should be all good news… The problem is that many times the decision maker(s) of a high growth company have never experienced high growth. Sometimes, these can be startups or a business that developed a new product.

If you have not experienced it, then it really is hard to imagine all the things that can take place.

Example of a High Growth Scenario

Let’s look at an example of a high growth scenario in a made-up company…

You are a manufacturer of widgets and you own a manufacturing facility. You have 50 employees before the company is about to explode in growth.

Your VP of Business Development or VP of Sales brings you new contracts that will significantly change the size of your company.  These contracts will double, triple, or even quadruple your business in the next 18-24 months.

So no worry about generating sales….

But there are several questions that need to be asked and pitfalls to avoid in this company.

Pitfalls to Avoid When Growing Your Business

Inventory: How are you going to fill all those orders?

You need to purchase a lot of inventory of raw material. In addition, your purchasing transactions just tripled in dollars and quantity. Finally, you have enough machines to manufacture items for the next 12 months… But next year, you will need to acquire more machines to keep up with demand.

Labor: What about labor?

The purchasing person is working already 50 hour weeks, and you know you will need to hire another purchasing person. Your plant labor needs to increase to compensate with the increased workload.

Right now, your 3 person accounting team includes 2 bookkeepers and a controller. You realize you need a cost accountant.

Systems, Process and Procedures

You have used a basic accounting system for 10 years, but you realize that you have outgrown the accounting system. It is not the right system because it does not handle cost accounting or standard costs. You want to integrate purchasing and inventory modules.

For years, you kept inventory and work-in-process on spreadsheets. Now, the dozens of spreadsheets are not reconciling. It’s time to automate inventory.

The once per year physical count of inventory is no longer enough. You need to have cycle counts and maybe at least a full physical count quarterly.

For years, you have operated informally, but you now you realize you need to have written policies and procedures.


You have run your business on a hybrid cash/accrual system, never really got to full accrual accounting, and never really worried about GAAP financial statements. Maybe you should…

You never considered having your financial statements audited; however, with all this growth, you might sell one day. Having your financial statements audited would add value to your business.

Your company is growing so much, you need more than financial statements that tell you what happened in the past. Now, you need projections, budgets, and dashboards.

It’s time for a strategic financial partner. It’s time for a CFO.

Click here to access our Goldilocks Sales Method, and learn how to build your sales pipeline and project accurately.

Human Resources

Your admin person that did a great job all these years is now dealing with 3 or 4 times as many employees. It’s time to hire someone that has a good understanding of labor laws.

Payroll was done in house. Now with so many hourly people and manual time sheets, it’s time to upgrade and integrate payroll to the accounting system or have it outsourced.

Consider automated time keeping and get away from the multiple spreadsheets.

Legal and Tax

Your new sales take you out of State. Now, you are selling in 5 different States.

Have you created nexus in these other States? They have State taxes… Oops!

You had to hire a few people on the ground in the other States; your labor laws just got really complicated.

Sales and Use tax… Are you paying the correct taxes, not paying them, or over paying them?

You developed a new process or Intellectual Property (“I.P.”). Did you register this? Did your attorney suggest maybe creating a new legal entity that has the I.P.?

By creating the new legal entity or new legal entities, did you realize you just created a lot of complex accounting work by having all those legal entities?

Note: We recently had a client that created 19 legal entities because their attorney wanted to “protect” them from everything. Now, they had to consolidate all those entities with hundreds of intercompany transactions.

What is your Exit Strategy?

You will be quadrupling the size of your business in the next 2-3 years. You thought to yourself one day… I might want to sell this business.

What does it take to sell your larger company?

It takes time to set a strategy for an exit. It takes time to “professionalize” management and your back office.

Do you have a succession plan so that the business does not look like a one man show?

Do you have a 3-year budget with projections?

SCFO Lab Members: If you want to build your exit strategy and/or access your readiness for market, check out the Exit Strategy EP

How to Have Sustainable High Growth

I have hit on some of the basic topics that come up in a high growth scenario. There are many more things to consider.

The first thing that comes to mind is how are you going to pay for all this?

Do you have sufficient working capital?

Sometimes, you can manage working capital and have sustainable growth.

Many times, you need some sort of financing because of the timing differences in working capital. You cannot afford to sustain this high growth with out the financing.

Cash and working capital are key to the sustainable growth.

But just as important is having the right people. Not just having the right people on the bus… But having them in the right seat on the bus is critical. Not everyone is meant to sit in the same seat in a larger company. This applies to the management team as well as employees.

I have actually seen situations in high growth companies where the person that really needed to be fired was the owner or CEO.  Because the CEO of a $5 million dollar company is not necessarily the same CEO of a $50 million dollar company.

Don’t get me wrong… The ownership does not have to change. You can still own the business. But that does not mean you need to be an employee running the business.


In order to have sustainable high growth that will allow you to sleep well at night consider the above items but you must have the following…

  • Enough working capital
  • The right people in the right seats “on the bus”
  • More and different systems, process, and procedures
  • A strategic plan that will allow you to have a sustainable bigger company

Projections are a helpful way to grow sustainably and avoid an uncontrollable high growth scenario. Download our free Goldilocks Sales Method to start building your pipeline and projecting accurately.

Pitfalls to Avoid When Growing Your Business

Pitfalls to Avoid When Growing Your Business

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Protect Yourself: A Guide to Non-Compete Agreements

Oftentimes, businesses see their competitors as their biggest threat. But what if your star quality team continues to leave to join your competitor’s team? That is, in my opinion, the bigger threat. You have already invested in hiring, training, coaching, and developing those individuals. Then, they leave and directly compete against you. We see this commonly in consulting practices, but it occurs in every industry. In this week’s blog, we are taking a look at how to protect yourself and your company with non-compete agreements.

Non-Compete Agreements, Guide to Non-Compete AgreementsWhat is a Non-Compete Agreement?

A non-compete agreement is an agreement between the employee and the employer that attempts to prevent the employee from working for a competitor within a specified time period and geographical area. Furthermore, it must adhere to all state and national employment regulations. It is best to hire a labor law attorney to verify conditions and ensure that it will uphold in court.  The laws for non-competes and the effectiveness of non-competes vary greatly from State to State. In addition, ever changing laws and precedent will challenge the effectiveness of your non-compete.

According to the American Bar, a good non-compete agreement should prohibit a former employee from doing the following

  1. “… Working with a competitor
  2. … Soliciting former coworkers to be employed in his or her new company
  3. … Soliciting or disclosing confidential information, such as customer lists and data, learned in the course of their employment.”
If you want to protect your company’s future, then it’s important to know what could potentially destroy value. Identify “destroyers” that can impact your company’s value with our Top 10 Destroyers of Value whitepaper.

Why You Should Use Non-Compete Agreements

Take a look at your sales persons and/or consultants. They have developed a relationship with the client and have goodwill with that customer; however, if they decide to leave for whatever reason, then that positive relationship may be in danger. In addition, if that same sales person works for a competitor, then they may poach that customer with the goodwill they have already built up.

Non-compete agreements discourage employees from leaving the current company and competitors from poaching those employees. This only occurs if the non-compete agreements will hold up in court and if the company (you) will take the employee to court. I have seen non-competes work and prevent stealing customers and employees. I have also seen non-competes not hold up in a case. It all depends on the case law, the State you are in, and your luck with the judge hearing your case. 

Tip: A contract is useless unless you enforce it. You must be prepared to take a broken contract to court.
Discover if there are any “destroyers” in your business with our free Top 10 Destroyers of Value whitepaper.

Who Should Use Non-Compete Agreements

You should consider these agreements for employees, clients, shareholders, suppliers, and partners; however, non-compete agreements are typically reserved for executives, senior management, research and development, and key sales people. Not all companies should use non-compete agreements.

Non-Compete Agreements, Guide to Non-Compete AgreementsA Guide to Non-Compete Agreements

Here is our guide to non-compete agreements. It covers trade secrets, how to protect yourself, and how to protect your company’s future.

Trade Secrets

Trade secrets need to be protected, especially from competitors. A non-compete agreement helps you to protect those trade secrets in the case an employee leaves for a competitor. Also, your company hand book should remind employees that all inventions, ideas, patents, and creative work they develop while at work, is the companies property. Please check your local laws and precedents for more information.

Protect Yourself

The goal for having non-compete agreements with employees is to protect yourself (your company). As said before, non-compete agreements are usually intended for the key management team or anyone with a direct relationship with customers. It’s important that you understand your State law. Certain states, like New York, do not allow for companies to extend non-compete agreements too far down in the organization. The goal of non-competes to protect yourself from growing competitors or new competitors that may pop up as a result of key players building their own organization.

Protect Your Company’s Future

Protect your company’s future by protecting your most valuable assets – your human capital. Don’t let gaping holes in your employee policy leave your open for financial loss. The American Bar says that, “Having a valued employee defect to a competitor and take sensitive proprietary information such as customer lists, pricing information, marketing strategies, or product and service expertise with him or her can be a devastating blow to any business – large or small.”

Protect your company’s future with our Top 10 Destroyers of Value whitepaper.

Example: Consulting Firm

Let’s look at an example of a consulting firm! They are trying to prevent any client from hiring one of their leading sales person or a critical member of the team. In an consulting firm, the top challenge faces is when clients hire your consultants out from under you. For example, you hire Tammy to work 20 hours a week, 50 weeks out of the year. A client will pay $150,000 for a 1,000 hours of her work. As the owner of the consulting firm, you get 40% of the $150/hour. It’s a win-win situation. You fulfill a client’s need and fulfill Tammy’s need for business.

As the relationship further develops, Tammy and the client decide that they don’t need you. Unfortunately, this option only benefits Tammy and the client. It hurts you. If the client offers, $200,000 a year in compensation, then Tammy is pleased. She has consistent work, focuses on one client, and does not have to worry about any gaps in her hours. On the other hand, the client is pleased because they now have a full-time salaried employee that works 50 hours a week for 50 weeks a year.

Let’s calculate the price difference for the client!

Tammy’s previous hourly rate was $150.

With the client, Tammy costs the client $80 per hour. Divide $200,000 salary by 2,500 hours of work to come up with $80 per hour.

Furthermore, you have lost an income stream. Then you have to find, hire, and train a new employee – continuing to cost more and more. If you continue to loose more consultants, you will no longer have a firm. All employees and clients have left.

Non-compete agreements would have protected you from loosing your company.

Don’t Destroy the Value of Your Company

In conclusion, you should use non-compete agreements to protect the value of your company. There are many other ways to make sure you don’t destroy the value of your company. To improve the value of your company, identify and find solutions to those “destroyers” of valueClick here to download your free “Top 10 Destroyers of Value“.

Non-Compete Agreements, Guide to Non-Compete Agreements

Non-Compete Agreements, Guide to Non-Compete Agreements

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General Counsel on the Board

See Also:
Ten In-House Secrets for Reducing Your Company’s Legal Costs
Red Herring
Board of Directors
Benefits of an Advisory Board
How to Form an Advisory Board

General Counsel on the Board

It was once far more common for Boards of Directors to include a lawyer who doubled as general counsel. Some boards still engage their attorney board members as legal consultants. The general counsel is especially busy before board meetings. They are reviewing the agenda to determine whether it involves legal issues or requires adoption of formal resolutions. Most important, perhaps, is the general counsel’s role in making sure that the board meets its fiduciary responsibilities.

In this article, we will briefly look at the question of the general counsel’s place at the boardroom table.

How Involved Should the General Counsel be During Board Meetings?

Unless the general counsel is actually a board member, they have to remember that their presence at board meetings is as staff to the board. Sometimes, the general counsel doesn’t remember this. Then they start engaging in debate on policy aspects as opposed to the legal implications of a given move. It is important for anybody in a board meeting to remember his or her own role.

General counsel can attend board meetings, but they should play a relatively passive role. General counsel on the board is there to observe and to flag issues if they arise. Attending the board meetings helps the general counsel to get a sense of the personalities on the board, the board’s tolerance for risk, and whether it likes to act conservatively or aggressively. Part of the general counsel’s job is to evaluate risks for the organization and help shape its response. General counsel is there to make sure that the board avoids legal problems.

Some boards want nothing more from their lawyer than to answer the questions they may pose and a strict review of legal options. The general counsel’s role at board meetings really depends in part on the management philosophy of the organization.

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Where Should a General Counsel0l Draw the Line Between Speaking Up and Staying Quiet at a Board Meeting?

Lawyers and legal issues shouldn’t dominate the decision-making process. The general counsel attends the board meetings to primarily comment on legal issues, and on other issues when requested. Once the general counsel tells the board the advantages and disadvantages, risks and alternatives, and the appropriate legal process to follow regarding a particular issue, then it’s up to the board to pick which way to address the problem in a way that makes the most sense from a business perspective.

In addition, a lawyer who is not a director should not give an opinion on policy unless asked specifically.

What Happens When a Conflict Arises Between General Counsel on the Board and the CEO to Whom the General Counsel Reports?

If there’s something going on that is illegal or clearly not in the best interest of the corporation, and the CEO isn’t reporting it to the board, then general counsel on the board has an obligation to discuss the issue with the board, usually through the chairman of the board. However, it is not the responsibility of legal counsel to go over the CEO’s head and report to the board just because the attorney may disagree with a business judgment the CEO has made. A general counsel must be able to make the distinction between when something is a business decision – such as how much you pay for a service – and when it is a legal issue – such as when you are paying so much it could be considered a kickback.

One other important thing is for the board members to know whether the general counsel is free to raise issues with the board chairman when he or she thinks that the interest of the corporation requires such. The board needs to have the comfort of knowing that the general counsel has ultimate responsibility to the board. This is much like their relationship with the auditors of the company.

Manage Your General Counsel on the Board

The general counsel, if well utilized, should be working with senior management and the board chairman to come up with continuing education for the board on legal issues affecting the company.


Your company must disclose to your outside lawyer its communications needs upfront!

For its part, your organization must be prepared to fully brief outside counsel when referring a matter to them. The company must brief the outside lawyer responsible for the matter on what the matter means to the corporation in a business context. Then they must outline the terms of reference for a meaningful communications linkage between the corporation and outside counsel. In other words, fully apprise the outside law firm of the corporation’s information expectations on a particular matter.

If the business manager responsible for the matter wants to be kept abreast of all developments in a matter on a real time basis, then the law firm needs to know this at the point of the initiation of the engagement… Instead of several months later or after complaints by the business manager. In many instances, a company is reluctant to convey this to outside counsel when initiating the engagement. The primary reason for this is because of the cost implications. A high service communications program between outside counsel and its client costs money to implement and administer. But, the costs are invariably incurred, perhaps even at a higher level than might otherwise be the case. This is especially true when the law firm is forced to scramble to respond to ongoing complaints or requests for updates.

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How to Manage your Lawyer

Manage Your Lawyer

Communication is a prerequisite for hiring a lawyer! Before a company and a lawyer can effectively begin dealing with one another on legal issues, they must be in communication with one another as to both parties’ goals and expectations. Either a lack of or breakdown in communications causes an inordinate amount of disputes (e.g., over time deadlines or fees) between clients and their lawyers. A business owner, or an in-house General Counsel of a corporation, explodes when presented with a bill for professional services that, regardless of merit and validity, comes as a complete surprise. Communication is the best method to manage your lawyer.

No Surprises

Clients do not like surprises! The General Counsel, or business owner, cannot afford to be kept uninformed or in the dark on a legal matter. He or she must report to an executive, or board, level that expects information that is accurate and up-to-date.

Gain Recognition

Communications is gaining recognition as an important service component in law firms. However, lawyers are not generally known for being proactive communicators with clients. Communication is often limited to a standard reporting letter sent out with a monthly bill or an after the fact report that a service milestone has been reached. This does not meet with the communication standards often placed on a General Counsel, or business executive. Typically, they are expected to keep other executives abreast of all current legal developments. The source of this problem is that lawyers do not have a professional level communications program in place.

Build a Relationship

General Counsels, and business owners, can change this. Start making communication one of the fundamental criterion in the relationship with your lawyer. Then, insist on a line of communication that is open and proactive. Finally, stipulate that you will respond to any inquiry on a legal matter within 24 hours. There is no reason that your lawyer can not respond with information that will at least inform you on the general status of a legal issue within this time frame.

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manage your lawyer

See Also:
Ten In-House Secrets for Reducing Your Company’s Legal Costs
How to Keep Your Corporate Veil Closed
Corporate Veil
What Relationship Should the General Counsel Have With the Board
Red Herring
How to Manage Your Banking Relationship

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Ten In-house Secrets For Reducing Your Company’s Legal Costs

See Also:
Tips on How to Manage Your Lawyer
What Relationship Should the General Counsel Have With the Board
How to Keep Your Corporate Veil Closed
Corporate Veil
Sunk Costs
Bankruptcy Costs

Ten In-house Secrets For Reducing Your Company’s Legal Costs

General Counsel,’ or “Chief Legal Officer,” is the job title of the lawyer who heads up the legal department in a corporation. As former general counsel of a small oil and gas company, as well as the assistant general counsel of two Fortune 100 corporations with annual sales exceeding a billion dollars per year, my job involved delivering and managing in-house legal services, managing external law firms, and contributing to corporate strategy. However, much of my time was occupied with finding ways to reduce your company’s legal costs.

Major corporations need a full-time general counsel, and supporting legal staff made up of other in-house lawyers and supporting administrative staff. However, smaller growth emerging companies may not have the luxury and the resources to hire such legal support. This article will assist you in developing legal management principles that can reduce cost and increase efficiency in your business. The primary goals of managing legal costs include the following:

  • Negotiating the cost per hour of a lawyer’s time
  • Reducing the number of hours of lawyer time required by the Company for external lawyers

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Reducing The Cost Per Hour for Legal Services

1. Recognize the ‘In-House’ Advantages

Corporations with in-house lawyers typically generate internal legal services at a cost per unit of time lower than hourly rates of external law firms. When legal services are delivered on-site, the lawyer becomes a familiar face, and can learn a lot about the company and the overall strategy of its management team. This makes it easier for the in-house lawyer to give pro-active advice that is in line with the company’s corporate strategy and business objectives. Having one lawyer responsible for delivery and management of all company legal requirements gives continuity critical to strategy implementation and facilitates cost management of the legal function.

2. Identify Legal Work Critical to the Strategy of the Company

Identify legal work critical to the core mission or strategy of the Company. Target doing it on an ‘in-house’ basis. As in other skill areas, the approach of ‘new economycompanies is to hire for core mission critical and strategy requirements. Then outsource the rest.

3. Recognize the Requirements of the Job and Obtain the Skills Needed

The ability to perform legal services at a high performance level is the primary basis of evaluation for a potential in-house counsel. Just as important are the in-house counsel’s ability to source and manage legal requirements that exceed his or her geographic, skill or time limitations. A third quality that you should desire in an in-house counsel is the ability to design and deliver internal legal liability reduction programs. They should accomplish this by creating standardized practices, materials, and processes aimed at reducing the Company’s legal costs over time. They should also reduce any potential legal liability, or risks, as the Company pursues its business goals and objectives.

4. Calculate Your Company’s Legal Costs

This requires adding up all of your legal bills for the previous year AND estimating the cost of productive executive time lost due to involvement in, concern about, or management of legal issues. Now you have identified the value of managing the Company’s legal environment. Adjust this amount upward or downward to reflect how you expect the current year’s business activity, and legal activity, to compare to the past year for the same activity. You can label the adjusted amount as your Company’s ‘projected legal costs.’

5. Assess the Cost of ‘In-House’ Employee vs External Lawyer ‘A La Carte’

Assess the cost of bringing a full-time lawyer on board as an employee (‘in-house’ employee cost). Then compare the cost to buying legal services from an external lawyer ‘a la carte.’ Recognize the value of educational, business, legal, ‘in-house’ and management experience and skills necessary to do the legal job for the Company as it is now and as you plan it to be in the future. Remember technical and industry knowledge may be important candidate factors. The fully loaded ‘in-house’ employee cost for an in-house lawyer recognizes lawyer recruitment fees, salary, executive benefits, support staff, allocated office space, office furniture, equipment, law library and electronic legal research costs, law society and practice insurance annual fees, and costs of ongoing legal education courses. If there is a risk that the newly hired in-house lawyer will not work out, then an allowance for costs of severance is prudent.

6. Compare the Projected Legal Costs to the Fully-Loaded ‘In-House’ Employee Cost

Make sure that you compare ‘apples to apples’. Avoid the “pitfall” of hiring an in-house lawyer that is too junior to do the job that you need done. This could be because of lack of experience, skills and knowledge. This could actually increase your Company’s costs because of the need to use external lawyers to supplement the work of your under skilled in-house lawyer. Of course, the more junior a lawyer is in experience level, the lower their salary for employment. But all other costs (which usually exceed salary) are more or less the same regardless of experience level of the lawyer employed.

7. Consider Permanent Outsourcing

If a new full-time ‘in-house’ employee is not in your Company’s current plans, due to staffing freezes, lack of desired flexibility, or other reasons, consider going for the ‘in-house’ advantages by permanent outsourcing. Some common benefits identified for outsourcing legal services for your Company include the following:

(a) strategic benefits such as an ability to focus company resources on its core business, access to better, and more efficient, technology
(b) operational benefits such as access to legal expertise, and experience, not otherwise available in the marketplace, scalable solutions, increased accountability
(c) financial benefits such as cost reduction and the “freeing-up” of capital for key projects

8. Consider Outsourcing

If you do not require a ‘full time equivalent’ for your company’s mission-critical and strategic legal work, then consider outsourcing. Outsourced legal services provide an opportunity to buy the services you need on a flexible, scalable basis. For example, The Phillips Law Group offers experienced in-house lawyers on a flexible schedule based on your Company’s legal requirements; such schedule can include a morning a week to full time. The services for such in-house lawyers can be priced on an hourly fee arrangement. They can also be priced on an alternative billing arrangement, such as target-fees, monthly retainer, project fees, or other basis. They work on-site at your premises. The pricing model reflects aggressive use of labor-saving technology and a belief that your Company should not pay any more for legal services than that which is absolutely necessary.

Reducing The Quantity Of Legal Services Required

9. Divide Your Company’s Legal Functions into Four Categories

Divide your Company’s legal functions into the following four categories:

  • Maintenance-related
  • Avoidable,
  • Transaction-related
  • Crisis-related

Then adopt management plans for each of those categories. Avoidable legal expenses are those that can be reduced through training employees responsible for causing them. An example would be targeting reduction of wrongful dismissal lawsuits by developing standard Company employment contracts and providing related training to the human resources staff.

10. Develop Standardized Materials and Procedures to Delegate Low-Level Legal Functions

Develop standardized materials and procedures to delegate low-level legal functions to business staff. Then have a lawyer monitor those functions. Functions relating to the Company’s compliance status and asset maintenance (e.g. routine procurement contracts, company and securities compliance filings, trademark and patent renewals) may offer a substantial opportunity to save money. Completion and return of standard forms can be delegated to trained staff and then monitored by a lawyer. Your Company can develop a process to review all patents and trademarks. Make sure that the Company is exploiting them, or has a potential use or revenue from each, before spending money to renew registrations.

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company's legal costs, reducing your company's legal costs

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Tips on How to Manage Your Lawyer

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Service Department

See Also:
Administration Expenses
Outsource Definition
Advantages of PEO Services for the Business Owner
Sunk Costs
Joint Costs

Service Department Definition

Many companies require support activities as well as core activities to produce their goods and/or services. Support services, or a service department, do not contribute directly to the production of goods or the providing of services, but they are necessary for the company to operate. In addition, consider service departments, support services, or administrative services support activities.

The costs associated with these support services must be treated in accordance with accepted accounting practices. They also may be allocated to the cost of goods and services produced by the company and/or allocated to other departments within the company. Furthermore, support services costs often comprise a large portion of overhead costs.

Because these activities are not the core activities of the business, managers often must decide whether to keep support service activities in-house or to outsource them. Often an outside organization that specializes in the particular support service in question can perform the activities in a more cost-efficient way. As a result, it may benefit the company to outsource that particular activity.

Service Department Cost Allocation Methods

In accounting, there are several methods for allocating the costs associated with service departments to the products produced by the company and also to the internal departments that benefit from the support services. These cost allocation methods include the following:

Support Services – Examples

Some examples of support service departments that you may commonly find in a company include the following:

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service department, Service Department Definition, Service Department Cost Allocation Methods


Hilton, Ronald W., Michael W. Maher, Frank H. Selto. “Cost Management Strategies for Business Decision”, Mcgraw-Hill Irwin, New York, NY, 2008.

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Red Herring Definition

See Also:
Ten In-House Secrets for Reducing Your Company’s Legal Costs
Board of Directors
Benefits of an Advisory Board
How to Form an Advisory Board
Why is Intellectual Property Risk Everybody’s Problem

Red Herring Definition

The red herring definition, or preliminary prospectus, is a legal document that must be submitted to the SEC for approval prior to an initial public offering (IPO). It is prepared by the company that is planning to go public in conjunction with the investment bank syndicate that is underwriting the IPO.

Red Herring Document

Furthermore, the document includes details about the company. It includes an explanation of the company’s operations and competitive position as well as copies of its financial statements. The document also includes the details of the IPO, including the type of security (common stock, preferred stock, etc.) offered, the number of shares offered, and the anticipated share price.

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red herring definition

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