Business growth is important for all types of businesses. Every business, regardless of size, is aiming to generate a regular and consistent income. Business growth can be hugely exciting, but it does bring changes within the business. This section looks at how to manage growth and be prepared for those changes, as well as the importance of knowing what you want to achieve and having a plan in place.
2. Preparing for growth
Business growth is important for all types of businesses, whether you are looking to expand a small start-up to create a major enterprise or consolidate a ‘lifestyle’ business to create greater personal freedom and security. Every business, regardless of size, is aiming to generate a regular and consistent income.
Aggressive, fast-growth strategies with high levels of external investment may not be for everyone. For some steady, organic growth achieved step-by-step is more appropriate. The objective is to build and develop a reliable, secure business.
Growth brings changes
Business growth can be hugely exciting, but it does bring changes within the business. Knowing what you want to achieve, being prepared for those changes, and having a plan in place, mean you can grow and achieve success in the best way for you.
Business growth is not always planned. It can happen in the normal course of business, particularly during the start-up phase. You may find that you make good preparations, set everything in place and the business comes pouring in. You make good steady progress and are pleased with your initial success.
You may also find that when you start your business, because you are now thinking differently and your mind is more open, opportunities appear that enable you to take your business forward.
When the business is doing well and growing, it’s a good idea to pause for a moment and take stock of what you’ve achieved and, perhaps more importantly, to be aware of what has led to your success. Understanding what has worked already can be a useful guide for the future.
Whilst you may be lucky enough to experience this sort of success, sustained growth rarely happens by chance, it has to be planned and managed.
When growth comes too quickly
You should also be aware that growth can sometimes happen too quickly and cause severe problems in the business. Orders come flooding in but you don’t have sufficient resources, you’re not able to keep up with production, your cashflow is stretched and you let customers down. For some this may be a temporary issue, but for many it can mean failure.
Preparing for growth
In short, it’s important that you are prepared for growth and consider the implications as well as the benefits of growing your business before putting plans in place.
3. Why do you want to grow your business?
There are a number of reasons, aside from the overriding reason of wanting to make more money that may motivate a business owner to want to grow their business. This may include:
- to gain economies of scale
- to be able to reach and service other markets
- to overtake a competitor
- to create a business that can be sold
- to build a legacy for future generations
Examine your reasons for wanting to grow the business.
Use this template to help you identify your reasons for wanting to grow your business (MS Word 11kb).
4. What is your exit plan?
When you’ve only just started your business, it may seem strange to ask how you plan to get out of the business. Very often, small business owners start their business so they have a job, rather than starting the business to create an ongoing asset.
How you build and grow your business is based on how you view the business and what you ultimately plan to do with it.
Here are some of the options:
- Are you planning to sell the business to an investor?
- Are you planning to sell it to your employees?
- Do you want to pass it on to your family?
- Do you want to keep ownership but bring someone in to run it for you?
- Do you plan to just close it when it has generated enough for you to live on when you retire?
If you start out with the end in mind, you can build your business in the best way to achieve that goal – and reap the benefits along the way.
There’s no right and wrong answer here. What you want to do with your business is a personal choice. And these personal goals play a significant role in directing your business goals and determining how you intend to grow your business.
Use this what is your exit plan template (MS Word 11kb) to help you clarify what you want to do with your business in the future.
5. Maximising the value of your business
In order to achieve some of these exit plan goals, the business itself has to have a value and not just be dependent on the business owner.
For example, in the case of a mobile hairdresser or a plumber who travels to their customers’ homes or premises and who does the work themselves, the business IS the business owner.
Without the business owner in place, there is no business and the business has no independent value.
If, however, the hairdresser moves into a salon, takes on and trains a team of employees, develops a brand and reputation for the business and has a regular and loyal customer base, then the business has a value, even if the hairdresser business owner is not there.
In the same way, if the plumber sets up a system which generates work which he provides to independent contractors to carry out on his behalf on a commission basis, then the plumbing business itself has a value.
As well as the tangible assets of a business, there are a number of intangible aspects that can give value to a business. These include:
- a strong management team
- a repeatable business model
- consistent operating systems
- an established and diverse customer base
- great products or services
- copyright or patents
- significant market share
- good supplier relationships
- an established brand and business reputation
- stable and increasing cashflow
- effective financial controls
- solid business structure
- realistic growth strategy
When you are preparing your plans to grow the business, it is worth keeping this list in mind.
Ask yourself if you are you continually adding value to the business, or simply reinforcing a reliance on you, the business owner.
Use this maximising the value of your business template (MS Word 11kb) to help you determine if your business has an independent value, or is its value tied to you, the business owner.