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Ninja Maneuvers Used by Growing Businesses

Given the realities facing companies in the post-recession economy, growing businesses and those who lead them require the skills and abilities of a ninja: stealth, speed, and efficiency. These maneuvers enable growing businesses to adapt resources (i.e., staff, production, sales efforts) to meet market demands hopefully without aid of nunchucks. Yet there is a fine line between intelligent adaptation, and total chaos. What sets flexible and resilient companies apart from their undirected counterparts is their ability to build infrastructure to accommodate change, rather than reacting helter-skelter to fluctuations in supply and demand. Taking a cue from Inc. Magazines Fast 500\5000 list (the fastest growing companies), its clear that rapid growth and huge revenues are only part of the story of successful businesses. Though these businesses vary radically in size, market share, and approach, they share spectacular growth (they have an average growth rate of 355% over 3 years) as well as leaders who possess ninja-level resiliency and flexibility (Over 50 Avalara customers are in the top one-third of this list a source of never-ending pride for us). How do they do it? And more importantly, how can growing businesses learn to use similar tactics to achieve radical growth? This paper examines three maneuvers growing businesses use to achieve above-average growth and higher revenues. These three strategies, outsourcing, automating and using cloud technology are only successful when leveraged smartly.

Ninja Maneuver #1 - Growing Businesses Know What to Outsource

It is no secret that companies utilize outsourcing to meet the fluctuating demands of the marketplace. What is often less obvious is determining when to outsource and which elements of the business to handle this way. The following three steps are often used by growing businesses to make crucial outsourcing decisions:

Step 1. Identify core competencies

According to the Law of Diminishing Marginal Returns, there is a point at which an additional factor of production (another employee, more hours, more money), yields a lower per-unit return. Knowing what to outsource hinges on identifying the point at which the current inputs, such as staff or capital, decreases the return on investment. Understanding that ROI isnt just about revenue, take a look at those areas in which your company sees a high return for a reasonable investment in time. These are likely your companys core competencies. Put another way, identifying core competencies helps growing businesses determine which resources to outsource and which to keep in-house. If, for example, your sales team continually meets or exceeds sales targets, but the internal systems for capturing leads requires an increasing number of staff hours to manage, it might be time to outsource these processes. If youre really good at a process, task or activity, and if its core to your business, keep it in-house. Hire the skills you need to build that core competency. If it isnt core to your business, consider outsourcing.

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Step 2. Identify time drains

Once youve identified the core competencies of your business, the next step is to identify any internal systems or processes (i.e., payroll, sales tax, IT) that utilize more resources than the business can afford. Some processes take significant time, either because of lack of expertise or utilizing manual processes when a faster automated process is available. Take one aspect of handling sales tax: exemption certificates. If a bookkeeper spends 10 hours a month chasing after certificates and then filing them, and in doing so barely keeps up with other tasks, this might be an area of inefficiency that makes sense to outsource.

areas that carry huge risk for your business (such as sales tax management), the risk exposure grows sometimes without you knowing it. This can lead to customer churn, litigation, fines or penalties, or legal compliance. In this case, outsourcing to experts not only reduces risk but delivers your company from the bad publicity penalties and litigations often carry with them. You dont want to be known as the company that faced heavy fines for breaking the law nor face the wrath of an unhappy customer on Facebook or message boards. Employee turnover As companies grow, they often cannot scale to the rising demands on staff time. If a staff person is effective and productive when the business is getting started, but cannot keep up as the business expands products and services there is a high likelihood of employee turnover. If youre asking your staff to do things they simply dont have the skills for, turnover can be an outcome. The high costs to morale and revenue of this turnover are well documented. This is one area where outsourcing can save time and money. In a recent Costco Magazine article, Paul Meades of Meades & Company suggests that outsourcing can be a strategic process that begins with examining your core business functions and prioritizing which might require fewer (or greater) resource allocations. After examining the tasks identified in the organizational chart, he suggests asking, How many of the boxes on the [organizational] chart are you regularly involved in? Think about how you can get out of those boxes you dont want or need to be in by outsourcing, delegating or recruiting. For growing businesses, delegation through outsourcing is often the most strategic option, both for accessing experts and redeploying staff to work on revenue-growing activities.

Step 3. Understand the impacts of not outsourcing

Once youve identified your companys core competencies and pinpointed time drains, youll have a better sense of which functions to outsource. In weighing the pros and cons of outsourcing, its important to understand the impacts of not doing so. Potential negative impacts of failing to outsource include lower customer satisfaction, revenue loss, employee turnover, and greater risk exposure. Customer Satisfaction Dont put your customer base in jeopardy for the sake of keeping tasks in-house or saving money on the front end. Take the software engineering firm that develops excellent sophisticated products, but lacks the skills and abilities to properly execute an effective product support program. Keeping subpar (and expensive) maintenance and support in-house can result in lower customer satisfaction. Revenue loss Companies that fail to outsource in order to handle either increases in volume or expansion into areas in which staff lack knowledge or training risk negatively impacting revenue. If a company can sell products, but lacks the processes to produce enough product to meet demand, sales and therefore revenue would be lost. Risk Accounting and compliance are two areas companies may think theyre handling sufficiently, but when analyzed from a risk-exposure perspective a large number of businesses would benefit from outsourcing. If, for example, your staff lacks proper expertise and training in

Ninja Maneuver #2 - Growing Businesses Automate

Unlike the automation introduced by Henry Ford (assembly lines), todays automation uses technology to streamline key business processes. From inventory management to sales to finance, automation gives companies the ninja agility, flexibility, and efficiency in a still-recovering market. The alternative handling these systems manually can stymie rather than promote growth.

www.avalara.com | 100 Ravine Lane, Bainbridge Island, WA 98110 |

Copyright 2013 Avalara, Inc.

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VCs are onto something successful businesses already know: automating key business functions is a predictor of success. Top venture capitalists agree. In Inc. Magazines 7 Bold Predictions from the Worlds Top VCs, Mike Kwatinetz, founding general partner of Azure Capital Partners notes many venture capital (VC) firms are investing in vertical solutions in what wed call boring or unsexy activities such as B2B sales automation. Things that people would typically yawn at, versus the more shiny B2C startups. These VCs are onto something successful businesses already know: automating key business functions is a predictor of success. Growing businesses leverage technology to streamline business processes. The more streamlined their business, and the more they outsource processes and expertise outside their competency, the more time and energy they have to be strategic, focus on what they do best, and, ultimately, grow their business. Here are more indications that it might be time to automate: Are your spreadsheets taking more staff time to manage as your business grows? If your company is drowning in obscure many-layered spreadsheets that require manual updates, it might be time to automate. Given the ease with which companies can implement smart software solutions (especially those supported in the cloud), it behooves growing companies to refrain from handling internal processes manually unless there is truly added value to that approach. Do your internal systems communicate with one another? Are you doing manual lookups or transferring data from one system to another? The beauty of finding the right cloud solution is that they are designed to handle data from several sources and data formats, and give you a clean, web-based interface to operate in. Do you spend an inordinate amount of time running reports or tracking performance? The emergence of business intelligence (BI) and big data solutions may help. There are now affordable BI solutions that provide everything from deep drill downs to data visualization, often at

an affordable price. An example is the increasing popularity of data analysis tools such as Tableau. Previously, companies had to purchase on-premise solutions such as SAS or SPSS. With web-based solutions such as Tableau, all updates and integrations are handled for you. And data visualization and reporting is far less complicated.

Ninja Maneuver #3 - Growing Businesses Look to the Cloud

Both automation and outsourcing allow growing business to better align company vision and mission with operations. Intelligently outsourcing non-critical, high time-intensive business processes, allows businesses to leverage staff time to generate more revenue. Automation creates further efficiencies by unburdening staff of manual and unwieldy tasks that are nevertheless extremely important to a growing business. Why Turn to the Cloud? In the past several years, many companies have turned to cloudbased computing solutions (those hosted and operated on the web, versus those that are on-premise) rather than their larger and often more expensive predecessors. Cloud-based solutions offer several tools that other systems simply dont: they automate updates and integrations without having a Chief Technology Officer handle time-consuming versioning and back-ups and they are able to grow along with the computing needs of growing businesses. Cloud-based solutions adapt more quickly to changes in operations and update automatically without a staff person having to manually track any changes or iterations. It used to be that in order to automate, growing businesses had to buy on-premise software that was expensive to buy and came with expensive maintenance costs. It was a tough choice to make. Now, Cloud software has made automation affordable and practical. For virtually any business process or function, there is a good bet that Cloud software exists to meet the need. From storage to billing to HR functions, there are usually ways to harness the Cloud.

www.avalara.com | 100 Ravine Lane, Bainbridge Island, WA 98110 |

Copyright 2013 Avalara, Inc.

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Key places for growing businesses to use cloud-based solutions Tracking and reporting on key metrics. Reporting and business intelligence software not only automates mundane tasks, but also gives you visibility and new insight through pre-built reports. Customer Relationship Management (CRM) systems. Tracking customer activity for support, up-sell and a solid customer database that has what you need to manage the sales process is must-have today. If youre using a dated system, take a look at new capabilities in the area of CRM and marketing automation. Phone and customer support systems. More and more of the traditional contact center systems are available in either hosted options or through the Cloud. This can give growing businesses more options in terms of growth and scale, rather than getting locked into old systems based on a fixed number of ports, capacity or connections. Customer support and trouble ticket systems and many of these integrate with your PBX or contact center infrastructure, whether hosted or on-premise. Compliance and business processes: from document management to compliance, what used to be inefficient, manual processes can be automated.

www.avalara.com | 100 Ravine Lane, Bainbridge Island, WA 98110 |

Copyright 2013 Avalara, Inc.

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Growing Businesses Use AvaTax.

Avalara. An easy automation win for growing businesses.

As businesses grow, theyre likely to increase their sales tax liability. Whether they hire contractors in a new state, or create affiliate relationships in another, a business might be liable to collect sales tax and not know it, or do so incorrectly and risk penalties and time-consuming audits. Manually figuring out accurate rates and keeping up with taxability and rule changes can be nearly impossible. And handling it in-house drains employee resources that could be used more efficiently in other areas. Automating sales tax using the AvaTax suite of products lowers audit risk and decreases unplanned penalty expenses. Companies that partner with Avalara get a simplified sales tax process and guidance when it comes to sorting out taxability rules and requirements. Avalaras solutions and our suite of products replaces manual look-up tables, the need to stay on top of rules and regulations, substantially cuts down time to file and close the month, and gives you a system for exemption (reseller) certificate management. We do it all. And when it comes to understanding and staying in compliance with taxability rules, Avalara walks you through the changing landscape of sales tax. But dont just take our word for it. Over 10,000 businesses have outsourced and automated their financial applications through AvaTax. You can watch some testimonials at www.avalara.com/resources/testimonials.

Getting started with AvaTax is easy.

As an integrated partner of most major financial software systems and shopping cart technologies, AvaTax can support your tax administration process without creating an information technology nightmare.

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About Avalara A privately held company, Avalara was founded by a team of tax and software industry veterans to fulfill a vision of delivering an affordable, scalable sales tax solution. Thus making what was not economically feasible in the past for mid-sized business not only affordable, but more accurate as well. All with the latest and most innovative technology available. From Bainbridge Island, close to Seattle, Avalaras knowledgeable staff works tirelessly to help customers put the hassles of sales tax compliance out of mind. Avalaras mission is to transform the tax process for customers by creating cost-effective state-of-the-art solutions. The company does so through integrated on-demand, Web-based software services that provide transparent transactions, accurate tax compliance, painless administration and effortless reporting.

www.avalara.com | 100 Ravine Lane, Bainbridge Island, WA 98110 |

Copyright 2013 Avalara, Inc.