Operating a business can be a highly rewarding experience, but it comes with a number of challenges. One of these challenges is to make sure your business grows over time. Growth can be difficult for a business to sustain, and it cannot be forced. Still, there are certain conditions you can set that will invite growth to take place.
By taking steps to optimize your business, you can prepare it for robust development. Read on to discover the most important things you can do to make sure your business is ready to grow.
1- Learn How to Measure Your Growth Rate Accurately
Before you do anything else, you should know how much you can reasonably expect your company to grow in its current form. That figure can then be improved. However, this is more complicated than simply looking at analyst estimates, since they are “almost 100% too high”. Some companies try to determine a rate by looking at their growth over the previous decade, but this isn’t an option for new businesses. Besides, growth typically slows down over time, which means that the growth rate for a company’s first 10 years is an unlikely indicator of what the next 10 years will look like.
A better strategy is to base your growth rate on your Return on Equity, assuming that you retain all your earnings and reinvest them into the company. Since that’s not terribly realistic though, it’s better to factor in any earnings that will go towards costs like maintenance or shareholder dividends. You also have to account for debt. You can do this by adding your long-term debt to your shareholders equity before you calculate your RoE. The formula for finding a more realistic growth rate would therefore look closer to this:
(Net Income – Dividend Payouts – Depreciation and Amortization) / (Long-term Debt + Shareholder’s Equity)
2- Reduce or Avoid Long-Term Debt
Since your long-term debt is going to result in a lower growth rate, one of your first steps should be to lower it. If your company hasn’t taken on any long-term debt yet, then you may want to sidestep it by seeking out short-term alternatives. Look for borrowing options that allow you to pay them back in less time, so that you can avoid costly interest and prevent your growth rate from shrinking.
3- Assess Your Company’s Physical Needs
Some people get so wrapped up in crunching the numbers that they forget the basics. Never dismiss the fact that your business makes products or provides services. As it grows, it will require more space or additional equipment to keep up with demand. Always keep accurate records of the assets that allow you to operate, and consider how much it will cost to purchase more. Having that money ready ahead of time can prevent you from running out of inventory or becoming overbooked, either of which can impact your net income and hurt your ability to expand.
4- Establish Strong Management Practices
Your physical infrastructure isn’t the only thing you’ll need to scale as your business grows. You will also have to make sure that your policies can accommodate changes in the size of your company. Make sure you clearly define the roles and responsibilities of your different employees, and create protocol for how they will differ as you take on more staff.
5- Recruit Top Talent
You might think that quantity trumps quality when you’re in the early stages of growing a business, but nothing could be further from the truth. In fact, it’s much better to invest in a few highly skilled people at the front end than it is to hire a large amount of mediocre staff. Hire a small number of consummate professionals, and pay them as much as it takes to keep them loyal and motivated. They’ll work hard to connect with your customers, attract new revenue streams, and stick around when you need them to take on more responsibilities.
6- Analyze Revenue Streams
Speaking of revenue streams, it’s important to revisit yours on a regular basis. Check to see that the strategies you’ve been using to make money are still effective, and keep an eye out for new ones. Methods that work for you at first might not work forever.
It’s crucial to research potential new moneymaking avenues and evaluate their long-term sustainability so that you don’t invest in a new market only to have it dry up in a few months. It’s also crucial so that you can establish good business expansion funding. Choosing predictable revenue streams helps you make sure you always have viable ways to turn a profit, so that you’re ready to avoid any setbacks..
7- Maintain Good Credit
Good credit will be vital to your company if you need to borrow money to sustain your growth. Many banks will require your credit to be perfect before they agree to loan you money. Private lending companies like Mulligan Funding are willing to approve you without perfect credit, but a strong credit score is never a bad thing.
You should note that the credit score for your business will be distinct from your individual credit score. There are three major business credit scores, but if you are applying for less than $1 million your lender will probably assess you with the FICO Small Business Scoring Service, or SBSS. The FICO SBSS is based on how likely it is that your business will make payments on time. You can establish good business credit by always paying your vendors and suppliers punctually.
8- Invest in Marketing
No matter how much value you offer your customers, it only matters if they know about it. A lackluster web presence or cheap advertisements can hide your quality from the people you are trying to reach. Digital marketing is especially important, since 76% of customers feel that marketing has changed more in the last two years than it has in the previous 50 combined.
To ensure that your company keeps growing, make sure your marketing is always handled by professionals. Potential customers should be engaged by your advertising and reassured when they visit your webpage.
9- Learn from Your Competition
Your competitors won’t have the same strengths as you, but they probably also won’t have the same weaknesses. Just like you, there’s something they’ll probably be very good at—and you can catch up by emulating them. Market research can teach you about more than your own company. It can also teach you about ways in which your competitors might be slowing your growth, so that you can take steps to prevent them.
10- Make Sure You Can Handle Growing Demand
Implementing the steps listed above can be expensive, and achieving the desired results can take time. You’ll need to make sure you can keep paying your employees, working with marketing consultants, and hiring professionals to optimize your digital presence. Many businesses borrow money to make sure that they can keep doing this work while they wait for the rewards of expansion to arrive.
A short term working capital loan can provide you with the money you need to fund these processes, and allow you to pay it back in as little as 8-12 months when they begin to grow your business. Mulligan Funding will quickly approve working capital loans without assigned collateral and with only 6 months of company history. They also offer small daily payments instead of large monthly sums, which makes it easier to pay off your debt and improve your rate of growth.
You can’t compel your business to grow, but you must make natural growth as easy as possible. Follow the steps listed above, and you should be able to put everything in place for your company to acquire and convert more paying customers, so that you can increase profits and grow your reach with as little risk as possible.
Call Mulligan Funding at 855-326-3564 to discuss your financing options today!