Designed to launch quick and grow fast, startups are booming – so it’s likely you’ll want to get in on the action and learn how to expand your business. Last year saw multiple exhilarating startup success stories, from the new ride-sharing app of choice Lyft to Instagram cosmetics phenomenon Glossier. With so much inspiration out there, most of America’s small business owners are dying to seize the day and scale up. After all, small enterprises are the beating heart of the US economy. Right now, there are over 30 million small businesses in the USA employing nearly half the population. What’s more, the majority of these companies are ‘micro businesses’ that employ less than ten people.
However, there is another side to the coin – many new startup ventures fail in their first few years of trading. Unfortunately, rapid growth can create high-stress conditions, where businesses can’t stand up to the pressures of fast expansion. Statistically, just two thirds will survive past their first two years. Furthermore, only half will make it past the first five and only one third will make it to a decade. Experts believe this tendency is linked to a lack of available funding and knowledge. Often, new entrepreneurs don’t have the experience to handle the move from launch to expansion, which causes significant strain. However, there are some basic lessons that can help small business owners deliver viable growth. In this article, we run through these key points, arming you with the tools to expand your business.
1. Know when to expand your business
This may seem obvious, but it’s amazing how frequently new entrepreneurs will try to expand too soon. This might be down to the fact that so many inspirational stories are about following your gut and aiming for stars. However, the truth is, the numbers never lie. If you want to know whether or not your business is ready to expand, look at the income your company generates daily. This evidence will help you devise an effective expansion strategy for the long term. Make sure you thoroughly study and understand the data so you can act on the insights it reveals. A good accountant should pay a central role in this process, helping you to extract the intelligence you need.
2. Stress test your operation
There are further ways you can make sure your expansion isn't a leap into the unknown. Another strategy when considering how to expand your business is stress testing. As your client base expands and demand grows, you need to be sure your business functions can take the strain. For instance, do you have the financial support to stimulate growth? Or do you have the human resources you need to meet rising demand? Perhaps most importantly, you need to make sure you have sufficient working capital. Cash flow is essential to sustaining periods where you’re spending money but your sales haven’t hit your account yet. Often, you’ll need to either negotiate new payment terms or seek support from business lending companies.
Through regular stress testing, you can face these obstacles head-on. A sensible approach is to outline what the implications of increased turnover will be. These could include increasing inventory orders, hiring more staff, taking on larger premises or altering shipping costs. Carefully consider how these actions will affect your cash flow in both the short and long term. Take advice wherever you can get it – ask your accountant, mentor, and colleagues about how you can mitigate the risks of expanding a business.
3. Diversify your customer base
When you’re expanding your small business, it’s important you don’t become too reliant on one high-spend client. For many, this is a mistake that’s all too easy to make – a customer keeps returning, spending money, and the relationship seems profitable and healthy. However, before you know it, your entire business is dependant on one relationship. If this client decides to go elsewhere for whatever reason, it could cause your entire operation to fail. Therefore, if you’re looking to grow, remember diversity is crucial. Don’t allow your acquisition efforts go slack when you’re doing particularly well on one account – it could cost you in the future.
4. Be a ‘no’ man
The former British prime minister Tony Blair once said, “The art of leadership is saying no, not yes. It’s very easy to yes.” Since, this quote has become a touchstone for leadership and business coaches. Moreover, it’s an important idea to keep in mind when you’re planning how to expand your business. As new customers roll in, it’s easy to lose sight of your principal goals. For example, you may start saying yes to every contract; not only can this put your operations under strain, but it can also drive your business in the wrong direction.
When accepting new work, analyze every project within your broader business objectives. However, this approach will often be driven by the numbers. By and large, you’ll have to weight up how the opportunity will impact your bottom line. Will the resources you’ll have to contribute represent a meaningful progression, or are your energies spent better elsewhere?
5. Learn to let go
Many entrepreneurs are ambitious people who like to be in control. However, realizing that you can’t do everything is an important lesson if you want to know how to expand a small business. For a start, there are only so many hours in the day and there is a limit to how many tasks you can personally attend to. Therefore, you need to learn to delegate – a crucial business skill which is otherwise known as management. This involves learning how to organize a corporate framework that nurtures a sustainable business scaling strategy. As you grow, you’re going to need support from your team, so you’ll have to consider implementing a management hierarchy. After all, when you’re considering how to expand your business, it’s vital you have the support structure you need to succeed.