Entrepreneurs can’t stand standing still. That’s why so many small and midsize enterprise (SME) owners and operators are so focused on business growth.
But growing profitably and financing your growth sensibly—whether through credit cards, small-business loans, merchant financing, or equity investment—is a big challenge for many SMEs. Approaching that business growth challenge with serious planning, self-awareness and the right funding can be difference-makers that help maximize your chances of success while mitigating your expansion risks.
Business Growth Starts With Knowing Yourself
The best business growth plans start with understanding who you are right now. What’s your value proposition? Why do you think customers choose you—and why do they actually choose you? The answers aren’t always the same. For example, you might think you’re competing on service, but customers may actually be choosing you on price.
What are your current strengths to build on? Who are your ideal customers—the kind you serve best and most profitably? As objectively as possible, what are your weaknesses? If you’re having trouble meeting commitments to customers, or don’t have strong processes to ensure consistent delivery, now’s the time to fix that—before you stress your teams and systems with rapid expansion.
Who are your competitors? When they beat you, why did they win? Sometimes you can learn this indirectly, through social media comments or the anecdotal experiences of your salespeople and retail staff. But often you need to ask customers and non-customers directly.
Targeting Business Growth Opportunities That Leverage Your Strengths
With that hard look at yourself, you can begin identifying promising business growth opportunities. Chances are, you’re already considering a few. Would a bigger retail space capable of stocking more products lead to a sales spike? How might a revamped, easier-to-navigate website impact sales? But don’t get so focused on one idea that you fail to consider others.
For example, if you’ve profiled your ideal customer, you can think about additional services or products she might want, or services that might add value to what she’s already buying from you.
Or perhaps you can identify an underserved market that your competitors haven’t noticed. Or maybe the best way to expand the business is through horizontal integration—purchasing a firm with complementary products or an adjacent service area. But it’s important to thoroughly understand the business, its finances and its culture. And, as Datto CEO Austin McChord observes, plan to communicate extensively before, during and after your acquisition to build mutual respect and retain the people who made the business successful.
Sometimes, you can get ideas from similar companies that operate outside your town, region or industry segment. How are they innovating to accelerate business growth? Trade publications can help identify such innovators, who might be willing to offer advice if they aren’t direct competitors. They may also share pitfalls that didn’t find their way into the glowing press reports.
Don’t limit yourself to companies in your own industry. As Fierce Loyalty CEO Sarah Robinson recently wrote, you can often find great product and service innovations in other industries and reimagine their ideas for your own product and service designs.
Carefully Plan to Execute on Your Business Growth Program
Once you’ve identified your best business growth opportunities, determine what it’ll take to execute on them. What new or improved processes are needed? What investments in technology or equipment are required? What skills must be built or acquired? For example, if you’re planning to serve an adjacent market that’s more upscale or sophisticated than your current customer base, will you need to retrain salespeople or plan a higher tier of customer service?
The best business growth plans start with understanding who you are right now. What’s your value proposition? Why do you think customers choose you—and why do they actually choose you? The answers aren’t always the same.
What metrics will you track to see whether you’re succeeding, so you can make appropriate adjustments? Who’ll be in charge of making it all happen? Do current employees have the time, or will you need to hire people? That will take time. Do you need specialists? Or nimble generalists who can play multiple roles and learn fast?
Get the Right Business Funding
Business expansion costs money. Consequently, all this expansion planning should get folded into a business plan that you’ll take to potential investors, or to a business loan provider, or other financing source. It’s rare that an SME can fully realize its potential by funding growth entirely from its own cash flow—in other words, without external capital. But even if you do intend to fund your own growth, it’s valuable discipline to create a plan as if you had to convince a skeptical lender.
When it’s time to find capital financing, the good news is more options exist today than ever before. The right business credit or charge cards can offer short-term funding for new business growth opportunities, especially when those opportunities won’t last long, such as a large contract bid that’ll be awarded soon and must be delivered on an accelerated schedule.
Credit cards are one example of unsecured lending, in which the lender evaluates the creditworthiness of a business, but doesn’t have specific collateral in the event the business fails to repay. Other types of unsecured lending include fixed or floating rate business loans with varying maturity dates; as well as lines of credit and peer-to-peer lending via online platforms.
Alternatively, businesses often fund expansion, acquisition, or large equipment purchases via secured loans. Here, the borrowing company pledges specific assets that may be taken by the lender if the borrower defaults. Sometimes, small businesses which don’t have substantial physical or financial assets can pledge inventory or receivables as collateral.
Don’t overlook any government incentives to help fund your business growth. This isn’t always free money—sometimes there are strings attached—but it can make a helpful difference. At the state or local level, incentives might include temporary tax reductions or credits, employee training resources at local colleges, below-market financing, university research partnerships, infrastructure support, technical assistance in reaching foreign markets, or even grants. At the federal level, the U.S. Small Business Administration may provide federal guarantees that protect lenders, enabling businesses to access unsecured loans that might not otherwise be affordable or accessible.
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