How to know if your business is a candidate
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.
On the other hand, if you are a reseller of products buying from distributors or vendors, then think about either expanding your product lines. Again, be careful with the direction you are expanding, as if you expand too broadly, and start to dabble in product areas that you are not experienced, you may jeopardize your business integrity. Choose new products carefully to add to your business.
On the services side, you should also take a close look at your service offers; especially if they are value added services. The key to services are your processes. Processes make or break the customer expectations for your services. If the customer is expecting your services to be conducted in a certain way, ensure that your processes match the customer’s expectations. For example, if you are a quick serve restaurant, then make sure you’re quickly serve your customers. They expect to walk away with their food when they pay, and every second they have to wait is a second lost to get them to return. On the other hand, if you are a full service restaurant, then ensure that you serve your customers within a more formal dining experience. This may vary from region to region, but you are the expert, so ensure all your staff know and execute the appropriate processes to best meet your customer expectations; especially to have processes in place if something goes wrong.
4. Benchmark your business reputation.
Nowadays your reputation is built both through actual customer experience as well as virtual. A good in-store or business experience is paramount to building a positive reputation. From the moment the customer enters your business to the time they leave, they are continually evaluating their experience with you whether they are thinking about it or not. Go through the motions yourself and test your experience as if you are the customer. Make changes if needed, and enhance your processes if necessary.
Building a good reputation only starts in your actual business. Virtually, information about your business, and more likely about the customer’s experience with your business, can now be published on the Internet. You can control the content of this information to a large degree, but you have to make an investment toward gaining control. The more likely areas your company information may be found are on social network sites. Depending on the type of your business you can identify the social channels that your customers may likely be using. These may include Facebook, Twitter, Yelp, Instagram, and Snapchat but do some research to find the sites most likely used; there are over 30 social channels used by businesses and consumers today.
Identify the social channels most likely used by your customers, take a proactive and reactive stance on each site.
Proactively, you can create your own business accounts, such as a Facebook page on your business. Make an investment to place valuable information up on your page, similar to the content from your website, but more informal and personal. Also, start a few blogs to create discussion, or to answer the most common questions you get from your customers. Be active; that is, update and change the page regularly at least once per week at a minimum. A static social channel page is a great way to turn away customers, so make an investment to monitor and manage your social pages.
There is also a reactive social investment. You should regularly monitor your Yelp ratings, or ratings from other social channels. Often if you can catch a bad review or comment from a customer, and respond to you with an explanation, you can neutralize the negative impact that it may have on your business. Monitoring is a daily activity. It may take just a few minutes each day but it can save you thousands of dollars on lost business if you can appropriately deal with negative information on the web about your business. Note that there are social listening software tools that could help you to quickly find comments about your business.
5. Take inventory of your available resources.
Some resources have already been mentioned in this article, but to name a few, start with finding business growth consultant. If you feel you need help with your finances, company structure and governance, legal advice, purchasing, or administration and processes, go find these strategy consulting firms! If nothing else, a conversation with a business advisor can help frame what you should do in your plan even if you do not use them long-term. You’re already successful in your business so you know how to find the right person that you can trust; so do it!
There are additional we’d like to share as well:
Topics worth researching
- Selecting reputation management software
There are a wide range of solutions to choose from. Some require larger time and attention investment than others.
- Are you using the right accounting system?
The right accounting system is an anchor tenant of any business. Setup, feature richness, and level of accounting knowledge help you pick the right one.
- Selecting a Point of Sale System
Point of sale systems are designed to run your business while helping you make sales and log transactions.
- Choosing the right payment processor
Accepting credit cards is vital in today’s market. Not all processors are the same. Checkout our evaluation tools.
- How to start a franchise
Buying into a franchise is an accelerant to getting started. All markets are different as are each franchisor’s restrictions and guidelines for growth. Learn more.
- Expanding to eCommerce
Digital marketing is a growth requirement now. Online transactions bring complexity to your business. Here’s how to get going with eCommerce.