Business Growth

How Do I Know If I’m a Candidate for Business Growth?

How is my business doing?  Am I making a profit?  Should I hire more employees to handle added business?  I sometimes turn customers away, is this normal or am I growing too fast? If you are starting to ask questions like these then perhaps it is time to start thinking about making changes to grow your business. Let’s see if your startup is a candidate for business growth.

What exactly is business growth? It’s a way to expand your business to better meet your customer needs.  Some of the signs that indicate that you are ready for business growth include a strong following of loyal customers, profitability for 3 or more years, a strong team of employees, and you have more business than you can handle.  If you find yourself in this situation, and you want to grow your business, here are 5 areas to carefully consider for prepare and create strong business growth.

• Assess your financial health
• Take an objective look at your market
• Evaluate your products and services
• Benchmark your business reputation
• Take inventory of your available resources.

1. Assess your financial health.  

Start by looking into the “rear view mirror” at your financials over the past few years.  Do you see a revenue trend going upward?  It doesn’t have to be a fast upward trend but even 5% or 10% growth year over year is a very good sign.  Additionally, take a look at your expenses.  If your expense are staying fairly flat, or even slightly downward, then you know that you have a lot of history to show that you can increase revenues with the same expense ratio.

Keep in mind that as you look at your financials the past few years, that you do so with the big picture in mind.  It’s one thing to have an increase in revenue with flat or slightly declining expenses, and it’s another thing to have achieved these numbers the wrong way.  The wrong way may include revenue growth by increasing prices rather than increasing volume.  Though your revenues may be increasing with higher prices, it is volume that generates underlying business growth.  Also take a look at your expenses.  Reducing expenses in a healthy way may mean that you have improved spending more efficiently, such as through volume purchasing or employee efficiencies due to more skilled or qualified employees.  Buying cheaper products may reduce your expenses but it doesn’t contribute to business growth if your service or product quality is diminished.

Still looking at your financials, you should also take a “forward” look for the next few years.  

Business growth comes from some appropriate level of investment.  You need to have cash to make some investments in key areas of your business to create a framework for growth.  If you’ve saved cash and have decided to use it for investment rather than to keep it as profit, then you are enabled to grow in the most efficient way.  Alternatively, you can get a loan from a bank, or from investors if you’ve structured your business with share ownership.  Only allocated enough cash that is in line with your profits, for you don’t want to overextend with too much growth.  An accountant or financial investment advisor can help you with the right amount if needed.

2. Take an objective look at your market

There are a number of market areas that you should consider, but start by looking at your competition.  Some business owners only look at market size, but it is your competition that drives the decision around whether you have a large enough market to grow.  What does this mean?  First, ask if there are a lot of businesses competing with you in the same geographical area.  If so, then you should consider the market size in terms of all your competitors together.  For example, if there are 10 businesses in your geographical area with 10,000 people in the community using these services or shopping at your business, then your market size is more like 1,000.  On the other hand, if there are only 3 businesses in your geographical area with 10,000 people in the community using your services or shopping at your business, then the market size is 3,000 people.

Second, assume you are not going to take business away from your competitors.  Business growth is usually driven primarily from selling your services or products to new customers into new markets.  It is much harder to steal business from your competitors than growing a business in new markets.  For example, if you are thinking of growing your business by adding franchises or offices in a wider geographical area, then find those areas that have no or fewer competitors.  It just makes more sense to help your customers who don’t have easy access to your products or services than it is to try and take customers away from a competitor.

3. Evaluate your products and services.  

If you sell products and you manufacture your own products, then you have the greatest flexibility to make changes, enhancements, or to extend your product lines.  To know what changes you need to make to enhance your products you should do primary research; that is, talk directly to a your customers.  But when you speak with your customers, don’t just go to them and ask blankly, “what do you want…;” instead, go to them with one or more ideas, and ask them what they think of each idea.  You may want to even have them score your idea on a scale of 1 to 5; and if you don’t consistently get 4’s and 5’s then reevaluate.