How to Plan for Growth as a Small Business Owner
As a small business owner, there’s no greater joy than watching your creation thrive. As you experience success, it’s only natural to think about growth, which is both exciting and intimidating. Starting a business is one thing but scaling up is quite another.
Research by Barclaycard found that in order to scale up, you need to re-invest 29% of your turnover, which is something of a scary prospect. In order to grow your business, you shouldn’t think about the company that you have today, but the one you want to have in the future. Growth doesn’t just happen; it requires a significant amount of forethought, planning and preparation. The following guidelines can help you to create a roadmap to grow your small business and set you on the path to success.
Set and Map Your Goals
It seems like all we hear nowadays is “goals this” and “goals that”, but setting realistic yet aspirational goals is important for driving your business forward. You need to know what you want to achieve before you set about trying to achieve it.
What is it you want to do: double your customer base, increase your turnover by 50% or broaden your range of products and services? Defining a goal is the first step towards achieving it.
Once you have set your goals it’s time to figure out how you’re going to get there. The services of an accountant or financial advisor can be really useful here as they’ll be able to inform you of what is - and isn’t - realistic for your business. They can also provide advice, industry insights and help you to adjust your plans accordingly.
Define and Track KPIs
KPIs - or key performance indicators - are metrics to track how well your business is doing. Sit down with your accountant or financial advisor to discuss which metrics are most important to your industry and business model so that you can define your KPIs. Keeping a close eye on these numbers not only helps you to measure your success, but also to identify potential problems before they do any real damage to your growing business.
Consider Cash Flow
It’s all too easy to get swept up in the nerves and excitement of the growth phase and forget to balance your cash flow properly. However, cash is king in business and a negative cash flow presents a significant threat. Growing your business means increasing your costs before you increase your revenue, which disrupts your cash flow and can cause problems if you’re not careful.
You can avoid these issues by creating cash flow projections and planning ahead to ensure that you’ll always have enough cash to continue operations. However, cash flow projections require a lot of time, effort and industry knowledge so it may be best to ask your accountant for help with this to ensure that your numbers are accurate and you don’t end up in hot water.
Substantial growth requires significant investment. Growing your business takes time, manpower and resources, all of which have significant costs involved. Fortunately, there are many different types of financing available to small businesses, but choosing the right one is important. Let’s take a look at some of the most common options:
● Business loans. Banks, credit unions, nonprofits and microlenders offer business loans whereby the lender pays out a lump sum that the business owner then repays in regular installments. This is a popular financing choice for business owners looking to make significant investments.
● Business credit cards. This option isn’t usually the best choice for making large investments but it can help to smooth out any short-term cash flow issues as you grow, as long as you manage your account responsibly.
● Equipment loans. This type of loan is specifically designed to help business owners buy equipment and functions similarly to a bank loan. It’s a fairly low-risk way of borrowing so this option is worth considering if you need to buy more equipment in order to grow your business.
● Equipment leasing. An agreement whereby a business owner rents equipment for a designated period of time, with the option to purchase or upgrade the equipment at the end of the contract.
Growing your business is certainly exciting but there’s still a lot to think about. Careful financial planning and expert advice can help your business to grow at a steady and sustainable rate, and allow you to continue to provide an excellent service to your clients in the meantime. It’s only natural to want to drive straight in, but taking the time to set clear goals, investigate financing options and define your KPIs will ultimately accelerate your growth.