Small businesses are prone to failure, but some manage to stay in business for years. However, taking it to the next level is a whole other challenge. Many small businesses struggle to grow, while some manage to grow into a big business. This process may take place slowly, while others hit the big league very quickly. Growing too fast, however, or in the wrong way can lead to disaster, and is a pitfall a lot of growing businesses fall into. Here’s how to go from small business to big business the right way.
Define Your Objective
You started with a business plan. Draft a new one with the vision of what you want your business to become. How many stores do you want to operate? How much business do you want to do in a given year? Think about why you want to grow the business. Don’t grow for the mere sake of growth, and be very careful of trying to expand in the hope it will improve profits.
Run the numbers to determine how you’ll achieve this. What do you need to do to raise the capital for this expansion? How will you manage the debt payments if you don’t have the cash? Plan slow, steady growth instead of doubling the number of stores or customers in a given year. Have a plan for every purchase and new hire.
Know Your Market
Not everyone has a product or service that can scale up. There may not be a market for what you offer. Know how you’ll reach a larger market, whether it is taking your product international or serving new market niches. Recognise that this may require new variations of your product or changes to your service delivery model. Consider now what competencies your leadership team needs – whether it is international logistics or knowledge of the language of your target market.
Consider partnering with other firms rather than reinventing the wheel. This may let you sell more products with less risk.
Slowly, Steadily Raise Revenue
Sudden price hikes can scare away clients. If your operating costs are increasing or you simply need to improve your profit margin, increase your prices by a small percentage. Wait a few weeks or months, and then increase them by another increment. Watch sales data. Ensure that your growth is sustainable. If sales drop off, you may need to lower prices again.
We often ignore the impact of collections and the literal cost of late payments, though this can cause havoc for small businesses. One solution is to pay attention to payments from clients. Resolve payment problems immediately. Be clear on your payment terms, and be aggressive on collections. You don’t have to cut off a slow paying client forever, but you could forbid future orders until they get current. You could also incentivise paying in full up front. If slow payments and non-payment are an issue, it may be wise to do credit checks of clients.
Manage Your Costs
Ensure that your production line is as efficient as possible before you increase your sales quotas. You want to maximise production before you have orders to fill. This optimisation will also allow you to expand without adding much more equipment.
As your business grows, recognise that small business plans aren’t good enough anymore. You’ll have to find a way to leverage volume and find a better energy deal. In this case, it would be wise to work with a brokerage service that will understand your business and be able to connect you with multiple service providers while negotiating for you. Energy brokerage services, for instance, are familiar with large business energy contracts. Demand volume discounts from your suppliers.
Pay attention to your inventory. Don’t make things in the vague hope they’ll sell. And don’t build up a massive inventory that may go bad or go out of style before you can sell it. If you are stuck with such an inventory, liquidate it so that you can reinvest that capital into the business. Determine what assets you own and how they contribute to the bottom line. Be willing to sell unused equipment and material. This reduces how much effort it takes to manage your assets, and it raises capital. It may even help you avoid liquidity problems.
Growth can crush a firm when they make mistakes during this critical time. However, with the right growth plan and strategy, you can expand your firm without experiencing a cash crunch and minimal risk to the firm’s survival.