Whether the business is growing rapidly because it is very new, or is an established business that is steadily becoming more substantial, planning is essential. As the old saying goes, if you don’t know where you’re going you’ll end up somewhere else.
Coping With Rapid Initial Growth
This is the really exciting part of running your own business, when everything is going right and your customers can’t get enough of what you provide. There can be a trap though. In order to produce more you need to buy more raw materials and hire more staff.
And this costs money that you may not have because your customers haven’t paid you yet. You might also take longer to deliver orders and quality may suffer because everyone is too busy. Planning will help avoid this scenario.
How Big Is Big Enough?
The first stage of planning for growth is to know how big you want to become. And you may not want to become very big at all. A major reason for starting up a business is to get off the big corporate treadmill and live a more balanced lifestyle. Take time to sit back and work out exactly what your personal objectives are.
Some small companies more than double revenue in a year, and you may find it helps to consolidate every once in a while before embarking on the next growth stage.
It’s important that all your company processes are working effectively and efficiently. It’s much easier to fix these when you are smaller than when you are bigger.
The old warhorse of any sort of plan is the SWOT analysis. SWOT stands for ‘strengths, weaknesses, opportunities and threats’ and should already be part of your business plan and marketing plans.
Strengths and weaknesses are internal factors, while opportunities and threats are external factors. Doing this will allow you to identify the areas that require immediate attention and change.
You can apply SWOT not just to the company as a whole but also to specific areas. These can include:
• Finances and cash flow
• Sales and marketing
• Human resources
The Big Questions
While you are in a reflective mood, you should also ask yourself:
• What business am I in?
• What products/services do I sell?
• Do I have a reliable supply chain?
• How will expanding affect my current operations?
You may also want to look at ‘benchmarking’ your company, that is, comparing it with other companies in the same industry to see what you are doing better or worse than others. And closely examine your business’s productivity and ways in which it can boosted.
Keep Costs Down
Your planning for growth process should also involve ways in which you can lower your costs. With technology changing so quickly and a lot of new businesses starting up in every field, you may find that there are cheaper processes/suppliers/contractors out there. Don’t stick with the same supplier year in year out without making sure they are giving you the best deal.
The founder of Australian Chocolate, Vernon Stuber, says this is one of the most important things a business can do, ‘Cut your costs from day one, there’s no need for fancy offices or a flash car.’
If you’re expansion involves launching new products or entering new markets you should consider doing some market research. There are big companies who will do this for you, and charge a lot of money. But you can do it much cheaper by asking questions of your own customers or talking to your suppliers.
‘All Money Out’
There is never enough money in a growing business. As one small business owner once said: ‘It’s all money out at the moment’. Even if you are making a good profit, every dollar could have a hundred different good uses. The following are the major sources of external funding:
• Savings (personal or in the business)
• Loans (banks or private)
• Business angels
• Venture capitalists
• Issuing shares
• Listing on the stock exchange
• Government grants
The main sources for a small rapidly growing business are venture capitalists and business angels.
Venture capitalists have plenty of money that they like to invest in growing companies, but they do not come in at the very early stages. And they like to see a business that, although small, is thriving – that is, a business that is seeking money to grow, not limping along hand to mouth from month to month.
They will also want to own a sizeable chunk of the company, so are not suitable for anyone who wants to retain complete control. On the other hand they will mentor you, giving you the benefit of their experience in growing successful companies.
Business angels are similar to venture capitalists, but less ‘corporate’. They are individuals, often retired executives or entrepreneurs with a lump sum payout, who wish to be involved with a small business and help it grow.
The relationship will be a lot more personal than with venture capitalists and they will often want to work alongside you in the day-to-day running of the business.
A New Structure
Planning for growth should also involve consideration of which company structure is most appropriate. Many businesses start out as a sole trader, but after a few years it may be more desirable to become a partnership (giving you access to funds and expertise) or a company (that means the company is liable for any debts, not you personally).
There is plenty of help available for companies that want to grow. The federal and state governments are a good source of basic information, while accountants also have a lot of experience with expanding companies. Or you could engage the services of a business coach.
Photo Credit: We Heart It