Small-business owners are often hyper-focused on business growth. But growing profitably and financing your growth sensibly – whether through credit cards, small-business loans, merchant financing, or equity investment – can be a big challenge. Approaching it with serious planning, self-awareness, and the right funding can make a big difference.
Start With Knowing Yourself
The best business growth plans start with honestly understanding who you are and why you do what you do. What’s your value proposition? Why do you think customers choose you, and why do they actually choose you? The answers aren’t always the same.
For example, you might think you’re competing on service, but customers may actually be choosing you due to price.
What are your current strengths to build on? Who are your ideal customers? As objectively as possible, what are your weaknesses? If you’re having trouble meeting commitments to customers or don’t have strong processes to ensure consistent delivery, now’s the time to fix that before you expand rapidly.
Who are your competitors? When they beat you, why did they win? Sometimes you can learn this indirectly, through social media comments or your sales team or retail staff's anecdotal experiences. But often you need to ask customers and non-customers directly.
Leverage Your Strengths
After some self-reflection, you can begin identifying promising business growth opportunities.
Would a bigger retail space to house more products lead to a sales spike? How might a revamped, easier-to-navigate website impact sales? Don’t get so focused on one idea that you fail to consider others.
For example, if you’ve profiled your ideal customer, you can think about additional services or products they might want or services that might add value to what they're already buying.
Perhaps you can identify an underserved market your competitors haven’t noticed. Maybe the best way to expand the business is through horizontal integration, purchasing a firm with complementary products or an adjacent service area. It’s important to thoroughly understand the business, its finances, and its culture first.
Sometimes you can get ideas from similar companies that operate outside your town, region, or industry segment. How are they innovating to accelerate business growth? Trade publications can help identify such innovators, who might be willing to offer advice if they aren’t direct competitors. They may also share pitfalls you can learn from.
You can often find great product and service innovations in other industries – and reimagine their ideas for your own products and services.
The best business growth plans start with honestly understanding who you are and why you do what you do.
Carefully Execute your Business Growth Plan
Once you’ve identified your best business growth opportunities, determine what you need to make them happen.
What new or improved processes are needed? What investments in technology or equipment are required? What skills must be built or acquired?
For example, if you’re planning to serve an adjacent market that’s more upscale or sophisticated than your current customer base, will you need to retrain salespeople or offer a higher tier of customer service?
What metrics will you track so you can make appropriate adjustments? Do current employees have the time and bandwidth for the plan, or will you need to hire people? Do you need specialists or nimble generalists who can play multiple roles and learn quickly?
Find the Right Business Funding
Business expansion costs money. Expansion planning should get folded into a business plan that you’ll take to potential investors, a business loan provider, or other financing source.
Most small or mid-sized business require external capital to grow. Even if you do intend to fund your own growth, it’s valuable discipline to create a plan as if you had to convince a skeptical lender.
When it’s time to find funding, more options exist today than ever before. The right business credit or charge cards can offer short-term funding for new business growth opportunities, especially when those opportunities won’t last long. For example, a large contract bid might be awarded soon, requiring businesses to move quickly.
Credit cards are one example of unsecured lending, in which the lender evaluates the creditworthiness of a business but doesn’t have specific collateral in the event the business fails to repay. Other types of unsecured lending include fixed or floating rate business loans with varying maturity dates, as well as lines of credit and peer-to-peer lending via online platforms.
Alternatively, businesses often fund expansion, acquisition, or large equipment purchases via secured loans. Here, the borrowing company pledges specific assets that may be taken by the lender if the borrower defaults. Sometimes small businesses that don’t have substantial physical or financial assets can pledge inventory or receivables as collateral.
Additionally, don’t overlook any government incentives to help fund your business growth. Sometimes there are strings attached, but it can make a helpful difference.
At the state or local level, incentives might include temporary tax reductions or credits, employee training resources at local colleges, below-market financing, university research partnerships, infrastructure support, technical assistance in reaching foreign markets, or even grants. At the federal level, the U.S. Small Business Administration may provide federal guarantees that protect lenders, enabling businesses to access unsecured loans that might not otherwise be affordable or accessible.
The Takeaway
To plan for your business growth, forecast the years ahead by defining major goals and considering the macroeconomic backdrop, noting you'll probably need to revise the plan when necessary. Create a financial plan, ensuring you raise enough capital in cash flow and other funding to enable growth. Find ways to cut waste and properly allocate resources to make sure you can pursue your growth goals as planned.
A version of this article was originally published on February 27, 2019.
Photo: Getty Images
