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Four smart strategies to grow your small business into something big
A guide to effective small business growth.
Think it’s time to expand your business? Larger profits are attractive, but a bigger business doesn’t necessarily mean you’ll be earning more. It carries extra costs and far too many business owners stumble and fall when they try to expand.
Even if it doesn’t seem like it, your business may be expanding already. Every year of profit growth and every new customer means your business is growing. Opening at a new location, hiring more staff or ramping up production isn’t necessarily the right thing to do if you don’t have a plan for what happens next.
Beware of growth for its own sake
The first question to ask yourself is whether it’s actually time to expand. Don’t expand for its own sake, instead take the time to consider what your business will look like before and after.
Effectively managing your business means solving any problems that arise. When the problem is that you’re running out of office space and your staff is running on empty – an expansion might be the solution.
Low profits can also be a problem – business growth is one possible way of fixing it.
Know when it’s time to expand
At the end of the day, the problem might be boiled down to your business not maximizing its profit potential and expansion may be a solution. An increase in profitability is a type of growth, too. In all cases, it’s important to know when it’s time to expand your business.
If there are no specific problems which can be solved by growth it might be better to hold off. If you fully understand your business needs and know that opening a new location, hiring more staff or whatever form of expansion you have in mind will be beneficial, then the next question to ask yourself is how to best make it happen.
Determine if you can afford to grow your business
No one can ignore the factor of cost. It’s sensible to expect considerable costs and reduced profits while your business adjusts. Consider costs like:
- Additional training, hiring expenses and other human resource costs
- Extra maintenance costs
- Increased overhead and logistics costs
- The potential loss of customers
- Loss of revenue as you transition
- Increased marketing expenses
Examine your business’s cash flow carefully and be ready for potential problems. Your expansion plan should include a clear timeframe and a budget forecast in line with predicted industry movements over the next few years. Here are four questions to ask yourself to prepare:
- Can growth improve your quality? When going from 10 clients to 100 clients, for example, you’re suddenly only able to dedicate half as much time to each and might end up satisfying neither. The problem is a lack of quality. Growth in the form of additional hiring might be the solution.
- Could growth increase your presence in the market? Selling more of your products or services within a given market means you’re likely experiencing effective growth. If your products are highly regarded and well received, that may indicate that you’re able to increase your market presence.
- How will growing impact your efficiency? A larger business may be able to get efficiency benefits in the form of economy of scale. For example, being able to manufacture at a lower price per unit while retaining the same quality or being able to lower prices in order to become more competitive.
- Is your industry changing? Sustainable business growth is all about planning for the future as meticulously as you can. If your immediate, equivalent competitors are expanding in a way that threatens your current operations then you should ask yourself what will happen down the line. Similarly, a boom on the horizon means it might be worth positioning yourself to take advantage of it.
- Do you need more capacity? A bigger business with more capacity might start accessing contracts that were previously out of reach. If a manufacturer keeps finding themselves ineligible for valuable contracts on account of too-low output, then growth in this area might be the solution. You might also consider collaboration, specifically, as a way to increase your capacity.
You’ve decided expansion is suitable for your business right now but you don’t have all the liquid cash to cover all those big expenses that come with growing a business. Fortunately, advances in the lending market are closing the gap between businesses and competitive loans. No longer do you have meet stringent requirements from your local bank to get a loan. View the table below to see what top online business lenders have to offer.
These aren’t your only options. If your business has a promising financial history, there are many financing options for small- and medium-sized businesses.
Collaborate for effective growth
Businesses that innovate through collaboration are more likely to report increases in productivity, as well as, develop solutions that are new to the world.
Four necessary factors for successful collaboration within and between businesses are:
- The ability to recognize and apply external knowledge.
- Having a shared purpose people believe in.
- Mutual trust.
- Strong leadership.
If you are able to identify an opportunity, such as efficiency benefits from combining supply chains and are able to engage another business with similar needs in line with the four factors above, then you might have an opportunity for collaborative business growth. Collaboration can also be applied internally. The more your team members work cross-departmentally, the more opportunities there’ll be for new ideas to come to light.
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