When starting out businesses, most entrepreneurs have dreams of one day growing their businesses and commanding the industry. Starting or running a small business requires courage bordering on foolishness, grit, stubborn persistence, and a little bit of luck. If you’ve managed to stay in business beyond the startup stage, you are likely wondering how you can grow your business beyond the current status quo. The journey of growth represents an organizational and fiscal upheaval that could be difficult to navigate, unless you develop the right knowledge base, and execute very carefully. Opportunity for growth should be cause to celebrate, not to go bankrupt! Here are a few considerations to help you figure it out.
Fund Your Growth
There are essentially three common strategies used to fund business growth: financing, investment capital, and bootstrapping. We’ll walk you through each of these, and their various pros and cons.
If you have already proven your business plan and have accumulated sufficient assets, banks and other cash-rich institutions and individuals will line up to lend you money. But this might not be the best option for your cashflow. Dave Ramsey calls the borrower the “slave” of the lender, and this will prove true when you are trying to make payroll and your obligations to the bank are robbing you of the ability to take advantage of lucrative opportunities. Besides that, business debt exposes you to the possibility of bankruptcy. According to Dove, unsecured business debt in excess of $383,175 will preclude eligibility for a Chapter 13. Not fun! SBA or other business loans may look like a quick fix, but they can cause more problems than they solve.
Another option to raise quick capital is to go to a capital investment group or a wealthy angel investor and sell a stake in the business in return for an injection of cash. This option is not without its benefits. After all, an investor will have a stake in the company’s success, and will likely continue working with you to help you navigate the chaos of a growth season. But investment capital is not without its pitfalls. General partnerships can be extremely messy to dissolve. If you are the founder, you’re likely not excited about the prospect of giving up any percentage of creative control. Your business is your baby, after all. If you enter a partnership or joint venture, make sure you have plans for the 5 D’s: death, divorce, disability, drug abuse, and disinterest. All partners need a possible exit strategy in the event of one of these nightmare scenarios. Consider selling temporary royalty contracts or profit-sharing relationships rather than equity.
Bootstrapping is the process of reinvesting most or all of your profits into funding business growth, rather than taking all of the profits home as dividends. The downsides are obvious: less money in your pockets, and it’s a slower process. Nobody likes having their wallet squeezed, but the second consideration might not be as much of a downside as you might think. Bootstrapping forces you to prove out each stage of growth. This can be much better than potentially losing large sums of money on half-baked expansion plans. The slower pace lends itself to a more controlled growth strategy that won’t topple your leadership infrastructure. It may require you to say “no” to seemingly-golden opportunities, but there is no question that this is easily the healthiest and least-risky strategy in the long term.
One way of scaling your business up is moving out of your comfort zone. Depending on the product or services you are selling you can start selling complementary products. It’s difficult to predict what opportunities for lateral expansion will present themselves. And there isn’t one specific formula for identifying possibilities. Pay attention to your customer’s behavior before, during, and after purchase to see if there are other needs that are not being met. Diversifying is a strong growth strategy that allows you to create multiple streams of income that may help quiet the storms of seasonality or economic ebb and flow.
Leverage the Internet
It’s been twenty years since the net became mainstream. The opportunities for leveraging its connective power are no longer a new concept. Still, many small firms struggle to make full use of its potential. An article from Entrepreneur discusses online opportunities, categorizing them into ten strategies: targeting, content quality, content personalization, mobile, ecommerce, subscription, logistics, channels, specialization, and curation. Whether you put these strategies into practice, and how you execute them, will largely depend on your industry. But this is one technology that cannot be ignored if a growing company is to remain competitive. For more ideas, check out our guides on digital lead generation, mastering search and social, marketing your business online, and our comprehensive Digital Marketing Guide for Contractors.
Focus On Quality
If you put more emphasis on the quality of your products or services, your business will surely grow. People are most concerned with getting value for their money. By raising the quality you will have your customers doing marketing for you without even noticing. And you will beat your competition more frequently by offering the better option. It can be difficult finding the right balance between the cost of your service and the quality. By finding the right mix you’ll be on the path to growing your business.
Scaling up a business for small business owners can seem like an impossible feat, but it’s not. The good news is that it will cost you very little, or no money at all, to expand using these tips. But a growing business brings other challenges too, including managing the organization. Consider looking into field service management software to manage operations as you take on more customers.