As a small business owner, you’ve cleared some big hurdles already. Now you’re setting sights on an even bigger leap.
But as you make lofty plans, it’s important to stay grounded, too. You should always weigh the risks, even as you contemplate the rewards.[1]
According to PNC Bank’s Shana Peterson-Sheptak, Head of Business Banking, the ability of your business to grow depends less on external factors such as the economy and more on internal considerations. Namely, are you financially, managerially, and emotionally ready for a fresh set of demands?
“Business owners always ask, ‘Can I grow?’ And the answer can always be, ‘Yes.’ However, it really depends on not just your successes to date, but if you have the people, skills, and resources lined up to keep that momentum going.”
And one of the first steps that any growing business needs to take? A little self-assessment.
So. How Are You Doing?
Expanding a business should never be taken lightly. There are all kinds of factors that come into play, from personnel to cash flow to the readiness of the market. If you’re contemplating growth, here are a few questions to ask of you and your trusted team members. And, when asking, be objective with your answers. Your success may depend on it:
- Do I have regular, reliable customers? If they’ve gotten you this far, can you count on them in the months and years ahead?
- Do my customers want me to grow? Maybe they’re clamoring for a second location or longer hours. Maybe they need you to fill bigger orders or provide greater variety of products and services. Whatever it is, talking to and listening to your customers can prove an excellent reality check.
- Am I turning a dependable profit? If your income statement swings back and forth like a pendulum--sometimes in the black, sometimes in the red--then determine what it will take to keep that income stream consistent and growing.
- Is my industry growing? If others with businesses similar to yours are struggling, it’s important to know if you are the shining exception—or if overall industry fundamentals make conditions ripe for growth.
- Do I have more business than I can handle? If so, it’s a great problem to have. However, will adding capacity with more employees, locations, and equipment generate more revenue and profit?
- Am I personally ready? Remember those long hours and risks you took to get your business off the ground? Growing your enterprise could prove equally taxing. Are you, your family and partners, and team members prepared for Act Two, and the sacrifices that go along with it?
And What Will It Take To Grow?
If you’ve done well so far and see a bright future, fantastic. At the same time, growth brings new challenges of its own, not to mention a need for greater sophistication in operations.
“Every business has gaps they need to fill in terms of skills, personnel, or capabilities” Peterson-Sheptak adds. “A small business can and will often improvise. Yet, the bigger you grow, those gaps can get bigger, too, and harder to bridge. So, when considering growth, it’s important to take a hard look at where your shortcomings lie—and have a concrete plan to address them.”
That might encompass any number of areas in your operation. You may have team members who are great for your current volume but might not be suitable leaders for the more rigorous production demands to come. It could mean hiring or training team members to bring greater sophistication in areas where you are currently underserved. Or keeping your return on investment top-of-mind when acquiring critical equipment.
At the same time, establishing a formal culture is key to growth. One of the biggest challenges that entrepreneurs face is to keep the company’s core values nurtured, even when the owner can’t personally meet every client and make every decision. In other words, how do you bottle all your entrepreneurial spirit and enthusiasm? How do you create a company ethos that guides and informs team members when you can’t be present?
Growth Isn’t Spontaneous. It’s Deliberate.
Your future all begins and ends with a plan.
“Expansion is tricky,” Peterson-Sheptak points out. “The same enthusiasm and can-do attitude that fuels an entrepreneur can often lead to underestimating risks when the stakes get higher. So, we counsel any growing business to look at plans objectively, not through rose-colored glasses.”
That means seeking out the expertise around you—your accountant, attorney, and other trusted advisers—to keep your expectations realistic. That also means paying careful attention to any skepticism about your most lofty ambitions.[2] Or, as Peterson-Sheptak puts it, “See their concerns not as raining on your parade, but rather as tough questions you’ll need to answer before moving ahead.”
Some advice she offers? “Businesses often underestimate the amount of money and time needed to increase their revenue stream. Growth means hiring and training people, buying in bulk, or bringing new equipment into the production process. Those steps take more time than is usually expected to really pay off.” In short, it’s prudent to overestimate expenses and underestimate revenue in your planning. That way, you’ll have the capital needed to make it until your plans succeed.
Once you’ve consulted your team of experts, create a roadmap for growth based on reality. And make sure your key team members are on board.
Of course, financial help is an important part of the process, too. When do you involve a banker as a small business partner? As Peterson-Sheptak concludes, sketching out your plans on the back of a napkin won’t prove sufficient.
“We love to see our clients succeed. At the same time, we as bankers have to say, ‘Seek financing only when you’re ready to answer all the questions about your business plan.’ After all, a bank is really all about managing risk. The more tethered your dreams are to reality, the more difficult questions you can answer with confidence. And the better your odds to secure the capital you need to finance growth.” [3]
If you’re ready to build on your success, an investment in truly knowing yourself and your current capabilities is the best place to begin.