- June 11, 2019
- Posted by: SBA Team
- Category: Uncategorized
Once you get over the initial struggle to get to profitability in the early days of starting a small business, you work away, happy to have no major issues. But how do you know when it’s time to grow, to expand, or to hire new people?
Grow when you’re ready, and do so in a deliberate and planned manner. Not too soon, not too late – learn to read the signs before growing your business.
Expanding a business can be the best and also the worst thing to happen to any SME. Do it too soon and you’ll be overstretched and under-resourced, but leave it too late and you’ll be left behind.
Knowing when to take the leap isn’t just guesswork. Here are the signs that will alert you that you’re ready to move to the next level with your business.
You are swamped
If you’ve got more business and work than you can handle, it may be time to hire more people. If employees are overloaded, not getting pay rises and starting to leave, it’s time to act.
Having a lot of work is a good thing, but when you have too much work but can’t afford to pay people properly to do it – then it’s a sign of flagging sales, or pricing imbalances. Raise prices, bring in more sales talent, launch a special customer promotion – somehow you have to increase your top line to do the right thing by your people. Time to shake things up!
Your customers are demanding more
Your initial products were so successful, but now your customers want more options or additional products. You’re lucky if this is the case; having a built-in audience clamouring to buy a yet non-existent product means you’re on the right path. Invest money into giving them what they want.
Customers may not always be right, but it’s worth paying attention when your customer is telling you to expand. A loyal and satisfied customer base will provide ongoing demand through repeat business and word-of-mouth recommendations.
Steady profit and cash flow
Consistent profitability is both an indication that you’re doing something right and a warning not to squander it. While a comfortable present is safer than an unknown future, a steady profit stream can suggest a healthy business model that’s robust enough to work on scale.
Costs are growing faster than sales
If your costs keep rising but profits and/or sales are not (or worse, are declining), it requires a closer look. Unless there’s a good explanation – such as investing in new product development or a large marketing campaign that hasn’t had time to pay off yet – you may have some dead wood to clear out.
For example, do you have unprofitable product lines that you need to jettison, or free services that you may need to start charging for? Not only do these things hurt profitability, but they hold the company back and divert resources from better opportunities. Just like with an old plant that will send forth fresh growth with a hard pruning, your business may need a trim in order to grow.
There’s not enough space
This is a good problem to have. If your business is growing so quickly that there isn’t enough room for all the employees and equipment; you need to expand into a bigger working space!
You’re behind on orders
This is a red flag that should quickly be amended. Whether it’s because you don’t have enough stock to fulfill orders, or enough staff to do the work, fix it quickly. You never want your customers to see any disruption in service, especially when it’s for a good reason, like being ready to grow.
You’re no longer the industry leader
This may not seem like the best time for growth, but if once upon a time you were known for your innovative products and now the competition is just behind you (or ahead of you), it could be time to look into growing into new areas, or investing in innovative research for the next big thing.
People want to buy your company
If you’re not interested in selling, take a potential offer as a huge compliment – you’re doing something right. Keep doing it on an increasingly more intense level and reassess selling in a few years.
There are new opportunities
While focusing on the minutiae of your own business, keep one eye on the broad factors and trends affecting your industry and market. Growth in these areas can help identify opportunities for your business to grow along with it, increasing the chance of a successful expansion.
At the same time, scrutinise the behaviour of your competitors for any otherwise unnoticed indications of industry and market movements.
You have done your research
Even if all the other signs are saying it’s time to expand, hold off until you have a comprehensive understanding of your business, your customers, your industry and even yourself.
Expansion isn’t for everyone, and expanding too much or too quickly can bring down even the best business. If you’ve done your research thoroughly and come to the conclusion that your business is ready, then that’s the strongest sign that it’s time.
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