Practically every small business owner has a goal of growing their business. Experiencing growth in your small business can exciting, exhausting, and overwhelming all at the same time.
Perhaps you own an IT business that helps companies manage their data better through the development of databases. Month-after-month you work with small clients who provide you some revenue, but not the big contract you are looking for.
Then, finally, you land a big client that is going to bring in more revenue than your past clients combined. While this is good news, failing to handle this growth effectively can hurt your business.
Today I want to discuss a few ways to properly handle growth in your small business:
Understand your limitations before taking on work
Some people will advocate taking on any and all business you can land. I disagree with this approach. You have to take into consideration your current capacity and the limitations on your time, knowledge, and ability to add employees whether they are part-time, full-time, or contract employees. It’s not as simple as posting an ad and having the right employee fall into your lap.
There’s a chance employees will quit in the middle of projects as well or some unforeseen circumstance will prevent them from working. Especially if you are a one-man or one-woman shop, make sure you work a clause into your contract that takes into consideration unforeseen circumstances that require you to miss a deadline or otherwise extend deliverable timelines.
Grow smart
I realize that “grow smart” is a rather ambiguous statement, but allow me to explain. If all your revenue is dependent on one client, and the contract is re-negotiated every six months, don’t sign an office lease for the next two years, and definitely do not go out and purchase property if your revenue isn’t solid. Growing smart means being critical of your revenue and expenses and making sure that expenditures make sense. It also involves forecasting where your business will be three, six, and twelve months down the road. Be realistic about how much growth your business can handle in a given timeline.
Get the right funding
While a business loan is available most of the time, be sure to also consider potential investors. Business loans can help you retain equity and in turn have more skin in the game, but there are also investors who have money and are looking for businesses to invest in. Sometimes investors also will have connections in the industry that will help you land new clients. Always consider the pros and cons of taking out a business loan versus taking on investors.
Of course, there is always the option of having no investors at all, and this is obviously where many small businesses start. Medtronic, one of the largest medical device manufacturers in the world, started in someone’s garage. For some time the founder was likely able to get by with self-funding his business, but there is no way Medtronic would be where it is today without the proper financing.
The Bottom Line
Growth is good, but if it isn’t handled properly it can actually hurt the company in both the short- and long-term. If a small business is going to grow successfully it’s important for the owner to understand the capacity for future clients, have a strategic and critical plan for growth, and finally the correct funding must be utilized.
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Photo by Paul Downey
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