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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