Almost every business owner wants to see his/her business grow. If you are thinking about the future of your business you probably have more questions than answers. But making sure you ask the right questions in every area of your business should lead you towards solutions that can move your business forward positively.
These are all serious questions, which need addressing on a regular basis if your business is to continue on a pathway to success.
Once you have survived the start-up phase of your business, you may be wondering how to take the next step and grow your business beyond its current status.
Choosing the right way to grow and the right strategy to grow through will depend on the type of business you own, your available resources, and how much money, time and sweat equity you're willing to invest all over again. If you're ready to grow, we're ready to help.
Step 1
Decide if you really want to be bigger
Making a decision on growth is a huge decision. So, coming to a conclusion should be based on factors such as what you want the growth to accomplish, whether you will still have the control you want, if the growth will still allow you to deliver the service and quality that you built your business on? What are your goals? For me, at least at this stage, my goals revolve around making a decent income, to be in a reasonable semblance of control of my own destiny, and to work from home to at least be near my family as I pull long hours.
Talk to your peers: Talking with folks in the same position as you, or folks that have been in the same position, is a great way to help you in the decision of growing or not growing. Often these people have been through exactly what you are going through, and as the saying goes, it's always better to learn from someone else's mistakes! Ask questions about why they chose to expand, why they went the way they did, and most of all, what they wouldn't do again.
Look at the positives and the negatives: While it is easy to say that if you expand, you'll make more money, have more power, etc., don't forget the negatives. With growth comes increased costs, more responsibility, more risk, and, like they aren't already long, longer hours. Hiring more people doesn't necessarily mean you'll have more time—in fact, the opposite is often true.
Could your growth hurt your business? Now there's a thought! And that's what weighs heavily on me. Could my growth actually hurt my business? As a service-based business, virtually all of my work has come from word of mouth … folks that are happy with the work I have done and spread it around. So, if they hire my company to do work for them, at this stage, they are hiring me. Will bringing on a new hire and growing hurt that? It may.
Step 2
Hiring new employees - and good ones at that
Well, you've made the decision. You've weighed the options and you are going to grow.
The first thing you have to deal with is getting help and hiring the right people. Hiring employees is a huge step that can radically change how you work and how you feel about your business—both in positive and negative ways. Friends and Family: As the saying goes … "Better the devil you know." Your family knows you the best. You know them. But can you work with them? What sort of working relationship will there be? Can you be their boss and a sibling/spouse/best friend at the same time, or can you separate it? One advantage to family is that they may be a bit more understanding when it comes to issues such as late pay, family situations, etc. Of course, this could also be a disadvantage (you may also be expected to "excuse" family emergencies). Also, it can be difficult to speak to "employees" as "employees" when they are also loved ones, and this can cause problems—both professionally and personally. You must set clear ground rules in advance and remind people that work is work and personal is personal. This is much easier said than done!
Full-time or part-time? Just what do you need to grow? Do you need a full-time sales person or will a part-timer do nicely? Figuring out where you need the most help is very important. The other thing to think about, aside from the cost of full-time vs. part-time (benefits, taxes, etc.) is if you want/need these people as employees or contractors.
Employee or contractor? The big difference between the two really gets down to things such as taxation and benefits and payroll, etc. With an employee, you have to factor all of those things into the mix. But, if your job is retail or requires that someone be at your location of business, then you likely don't have much of a choice.
Local or remote? One distinct advantage for a business such as mine, or one that uses technology a lot, is that location isn't as important as it was just a few years ago. I have worked with subcontractors on projects that were not only out of my time zone, but in other countries as well. I am working on one project for which the client is in California, US, I am in London and the person running the backbend systems is in France … cool! This arrangement is also good as the remote person most likely has his or her own equipment (a great expense savings), so you don't need to open an office to "store" the person (see, more money saved), and you can still have your own mental space to work in. It also allows you to find the best people—not just the best people in your area.
Step 3
Overhead and additional costs
With growth comes additional costs and overhead. Being one who is rather frugal with my expenses, I try to look at as many options as possible. Here are a few to add to the mix.
Office space. First off, if you don't need the space, for example, if your small business is purely on-line or you don't ever have walk-in customers, why rent or lease space? Do you have space in your home to set aside as a location to run your business? I'm talking about a separate space. One away from your family and one that you can write off on your taxes? So you need some space—what about a business center/business incubation center? These are popping up everywhere. Basically, you rent out a small office within the center, but with that comes a front desk person to answer and route calls, access to equipment that you don't have to buy (fax, copier, etc.), a "prestigious" address, and access to things such as conference rooms that you may not be able to afford otherwise. This is a great way to start! One other option could be to share office space with another company. This is a great way to offset costs, but if you go that route, make sure you set some ground rules, in writing, first. It's always better to cover your assets!
Equipment: Another killer of expansion is equipment costs. Rule #1 seems to be that leasing is the best way to go. It is better for your cash flow, you can write virtually the entire lease amount off on your taxes (depends on where you live, of course), and, when it comes to computer equipment and given the nature of the advancements in technology, you won't be stuck with a useless techno-dinosaur. Time: Yes, that's right, time. Remember that it will take a fair bit of time to get your growth level into a mode you are comfortable with. It will take time to hire and train the right person, to set up your bigger office and to get your equipment together. This is an important factor.
Step 4
Raising Capital
To grow beyond the start-up and initial growth phases, you will need capital to inject into your business. Now this, unfortunately, is easier said than done. Banks can be leery of entrepreneurial ventures and venture capital is not easy to obtain. But, although obtaining borrowed capital is difficult, it is by no means impossible.
Here are the main sources of funds:
Banks
Cultivate a good relationship with your banker. The more he or she understands your business and knows you, the more likely it is that your application will be approved. And this means more than just fronting up when you need money. Keep your banker informed of all significant developments in your business and routinely provide copies of your annual business plans.
Be prepared to demonstrate that your business is capable of generating cash flow and think about what collateral you have available to put up if necessary.
Venture Capital
In addition to a solid business plan and track record, venture capital providers want to see that you understand your customers and how your business is a good fit with their needs. So arm yourself with competitive intelligence and satisfied customers as references. Also, be prepared to show you have access to experienced management staff. These individuals need not be on your payroll but you should expect to show that you have a depth of experience and talent available to you at least in an advisory capacity.
Revenue Stream
Instead of selling equity to raise capital, consider selling part of the revenue of the business. In other words, investors advance loan capital and get repaid by way of a percentage of the sales of the business. This preserves your equity in the business and is attractive to investors because they receive an immediate cash return.
This method has the considerable advantage of avoiding securities laws (it is a loan rather than a sale of securities) but it is only viable for businesses with high margins and strong sales.
Direct Public Offering
If your business has a strong relationship with its constituents (employees, customers, vendors and community), consider selling stock via a direct public offering.
Here are 10 popular growth strategies that can be used with great effect.
Open another location.
Offer your business as a franchise or business opportunity.
License your product.
Form an alliance.
Diversify.
- Sell complementary products or services
- Teach adult education or other types of classes
- Import or export yours or others' products
- Become a paid speaker or columnist
Target other markets.
Win a government contract.
Merge with or acquire another business.
Expand globally
Expand to the Internet.
Which ever growth strategy you choose, make sure you are ready, plan well and assess your options often.
