One of the most difficult decisions a small business owner will face is determining when they’re ready to grow and expand their company. How do you know if it’s the right time?
While there may never be a “perfect time” to take the leap, there are some questions you can ask yourself to help you prepare. Consider the following to help your small business avoid the pains sometimes associated with growing.
Questions to Ponder
Your answers to these questions should help clarify whether you’re ready to take the next step in scaling your company. They can also identify weak spots that need attention, in order to purposefully prepare for growth mode.
- Do you understand your financials? You should be able to print off a profit-and-loss balance sheet and explain where you stand with every project at the end of the day. Small business owners usually know how much money they are taking in, but sometimes don’t keep as close a watch on expenses. If bookkeeping is not your strong suit, either invest in some training or pay someone else to do it.
- Do you have key employees in place who can take over some of your current duties? When you’re in growth mode, you will spend less time doing hands-on tasks in the field and more time managing people and thinking strategically about new business. You simply won’t be able to do it all anymore. Identify or hire someone you trust to handle core business functions.
- Do you know how much a new employee will actually cost? Remember to include salary, benefits, health care, and taxes as you figure out the total cost of employment.
- Have you documented processes and established standard procedures? As you bring more people into your operation, you will need to train new employees and create job descriptions that outline your expectations for each role. This is also the time to create an employee handbook.
- Where do your customers come from? Does most of your business come from repeat customers, or do you need to constantly generate new leads? Are you encouraging referrals? Does all your business come from one or two sources/customers? You may want to diversify your customer base, to protect yourself from losing half your business all at once if a main source of revenue dries up.
- What is your contingency plan for a downturn? Don’t overextend your finances in order to grow or expand. A dip in the economy can slow down new business. A major weather event might dry up access to raw materials. What’s your plan for a rainy day? You should have some back-up savings or an available line of credit to cover any downturns.
- What are your goals for growth? Develop a plan or vision for the next five to 10 years, detailing any vulnerabilities that could change your strategic direction. Create projections and establish benchmarks for taking stock of progress.
Understand that, as a small business owner, it’s very difficult – nearly impossible, really – to do everything well. You have a passion where your core expertise lives. Get help to fill in the gaps.
Take advantage of robust resources available to small businesses, such as:
- SCORE, which stands for the Service Corps of Retired Executives. As a resource partner of the U.S. Small Business Administration, SCORE matches entrepreneurs with mentor-advisors that provide free business guidance.
- The Wisconsin Small Business Development Center at UW-Madison provides no-cost consulting and non-credit courses to help businesses from start-up through growth.
- Tap into professional business partners, like your accountant, attorney, or business banker, for expert help with key aspects of understanding your company.
If you would like to discuss financing options for growing your small business, please contact me at (608) 497-4600.