How to Grow Your Small Business
by: Ben Botes
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.
About
The Author
Learn more at http://www.my1stbusiness.com/sales-letter/landing2.htm
Ben Botes MSc. MBA, is an
Entrepreneur, Speaker, Writer, Coach and academic. He is the founder of
My1stBusiness.com,
South African Business Hubs
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