Is there a way of knowing when it is the right time to grow your business? Doing so can result in many positive outcomes including exploring new opportunities, expanding products or services, growing your customer base, increasing sales and employing more staff.
However, before taking any first steps to grow your business, it is recommended that you consider why you want to grow, whether your business is ready to grow and the many ways that you can do it. Growing your business needs to be a considered step that should be researched and planned to ensure your business can take on and sustain the extra demands. It is more sensible not to take on any new business rather than do it and then realise that you cannot follow it through.
Preparing for growth
The first step in establishing if it is the right time to grow your business, is to determine if your current business performance can take on new growth and where the growth may come from. It is recommended that you regularly assess how well your business is operating and if any growth is likely to be successful if your business is already operating efficiently.
You may like to consider these key questions before you grow:
- Is your business improving over time?
- How can you improve your performance?
- Can you reduce expenses?
- How will expanding affect current operations?
- Are your products or services priced right?
- Do you have a reliable supply chain?
- Are staff sufficiently skilled?
- Are you performing better or worse than your competitors?
- Is there anything holding you back?
Further, you may benefit from completing an audit of your resources to take stock of your financial, staffing, physical and intangible resources. Next, a review of your business plan and SWOT analysis to consider the strengths, weaknesses, opportunities and threats of your business is a valuable step. You may also consider undertaking market research to analyse the current state of your market, competitors and customers.
Comparing your goals with actual results
To get a thorough understanding of where your business is sitting, you should compare your plans and budgets with actual results. Undertaking a review of your business and marketing plans will allow you to see your actual performance against your goals and resetting where necessary to ensure you’re on the right track. An inspection of your financial records and comparison against budget may require a reforecast of your targets to make them more realistic. Your Arabon accountant and /or business adviser can work with you to complete these steps.
When comparing your goals with your actual performance, you may find it valuable to ask these questions:
- What did the business do well?
- What didn’t go as well as expected?
- Where can the business improve?
- What changes are needed to achieve the growth we are aiming for?
Benchmarking your business against others of a similar size and industry may also assist in assessing your performance and resetting your goals.
Understanding the pros and cons of business growth
It is essential that you research and plan the growth of your business. If your business grows too quickly, or expands too much, you could experience financial, legal, staffing, resource and supplier problems. For business growth to be successful, it should be sustainable. Some of the possible negative outcomes of rapid growth may include:
- Outgrowing your premises and not having enough space for everyone to work efficiently.
- Decreasing staff morale and productivity if staff cannot cope with the extra work.
- A shortage of cash flow to meet expansion costs.
- Staff operating reactively rather than proactively from working under pressure.
- Decreasing quality of products and services, leading to an increase in customer complaints or loss.
- Increasing staff turnover as a result of heavier workloads leading to a loss of knowledge.
Understanding why you want to grow your business
Getting an understanding of why you want to grow your business will allow you to determine which direction and steps to take.
Do you want to grow your business because you are responding to strong competition, smaller margins or falling sales? Growing your business may help you to overcome these problems and attract new customers if you move to larger premises and increase your resources and stock.
However, growing your business because you are experiencing problems can sometimes make your problems bigger, with more money and risk involved.
Do you want to grow your business because the cash is flowing in, profits are increasing and all your hard work is paying off? Your business may become a market leader if you take advantage of strong opportunities. You can capitalise on your success, expand into other locations and employ more staff to cater for increased demand.
But if you expand too quickly you risk your business becoming unsustainable. Growth can put pressure on staff and resources, as well as financial and management structures as mentioned earlier.
Seek assistance and advice before growing your business
If you have decided that you do wish to proceed in growing your business, it is strongly recommended that you work with a professional business adviser to help. Talking with your Arabon accountant is also a good first step to get the ball rolling. Contact us on 1300 ARABON or visit our website for more information.