Growing your business without draining your resources can be a challenge for business owners. However, by taking the right approach it can be possible to achieve expansion, even on a tight budget.
Use other people’s money
There are few better ways of getting ahead than using other people’s money to do so. Once you have tapped the traditional sources of “friends, family and fools” there are a range of lending products available from financial institutions, including overdrafts, lines of credit, commercial bills, leasing and factoring. There also a number of small business grants available.
Loan repayments are tax deductible and, unlike equity finance, the owner is not required to give away any control of the business nor pay dividends.
Assess your resources
Business adviser Peter Baskerville of Southbank Institute of Technology suggests owners first assess their resources before embarking on any growth initiatives.
His checklist includes the following:
- What financial resources are needed to achieve the expansion?
- Is there sufficient supply of land, buildings and equipment?
- Are there enough suitably trained and qualified staff?
- What “social capital resources” exist in the form of goodwill, brand recognition and reputation?
- Are there established procedures for innovation and problem solving?
- Has the business secured its intellectual property, such as patents and trademarks?
Small business owners can get locked into focusing too much on their business and its area of expertise without considering the bigger picture. Are there other businesses you can partner with to add to your customer offering and enter new markets?
For example, a traditional marketing firm might tie up with a digital agency, or a gym could partner with local personal trainers to add value for customers.
Delegate and outsource
Becoming a bigger business means having more staff, and potentially less time to spend on strategic issues key to future growth. To save time, increase delegation and consider employing a qualified human resources manager if you have more than 100 staff.
Another option is to engage outsider providers for payroll and other personnel services, leaving more time for staff to focus on the core business.
Avoid expansion mistakes
Expanding too rapidly can risk the health of the business, as arguably seen in the collapse of retail chains such as Borders and Darrell Lea. Just because you are successful in your existing category does not mean your skills will extend to another area.
Instead, by acquiring a similar company or expanding your own, you will reduce the risk of failure by staying in your particular niche and working in a familiar market.
Common mistakes to avoid include buying businesses outside your core competency, outgrowing employees and production, overextending financial resources and management capabilities and underestimating the difficulties involved in merging your business with another.
By learning from other companies’ mistakes, doing your homework, valuing existing staff and customers and understanding your value proposition, it is possible to overcome the growing pains of expanding your business.