When running a successful business, there may come a time when you think about taking it to the next level. Here we look at what to consider if you’re looking to expand your business, and a few useful pointers for growing your business sustainably.
If you run a small business, it’s incredibly rewarding if you’re able to make a living from it, and your products or services are in demand. It may get to the point where you feel it’s time to step up. Perhaps you’d like to open a new premises, hire staff or launch a new product or service.
Expanding is a big step and needs a lot of thought and careful planning before being put into action. Here we’ll look at the important factors to consider in how to grow a small business, and some useful pointers to set you on the right track.
1. Ask yourself: Do I need to grow my business?
Before going any further, it’s important to consider whether it’s the right time for growth. Even if the signs are positive, the decision to grow a business isn’t without risk. Expanding too quickly can cause problems, so the timing needs to be right.
These are some of the signs that suggest your business could be ready to expand:
- Demand is consistently greater than supply. Being busy may seem like a good problem to have, but there’s a limit – especially if you have to turn potential customers down. If you don’t have the capacity to take on more work, you may be missing out on opportunities.
- The industry is growing. If you remain the same size in an industry which is increasingly in demand, you could end up losing out to your competitors.
- Cash flow is steady, and your profits are increasing. If you have regular income, and your profits are consistently increasing, it’s a good indication that you’ll be able to absorb the cost of expansion.
- You have time to dedicate to growing the business. As a business owner, you’re probably involved in most of the day-to-day operations of the business. Taking the necessary steps to grow your company, whether that’s raising finance or finding a new premises, will take you away from the day-to-day running of the business. So, before making the decision to expand, ask yourself if the business can run smoothly without you. If your employees can cover daily activities while you spend more time focusing on the expansion, this indicates that you may have the time to devote to the next chapter.
2. Decide on the right growth strategy
There are a number of different growth strategies that your business could take. It’s best not to rush into this but instead spend time coming up with a decisive strategy. There are various frameworks and models that can help you to determine the right way to grow.
Conducting a SWOT analysis could help you to formulate your strategy by enabling you to review your company’s current situation. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are the internal factors that you can control, such as employees, brand, and culture. Opportunities and threats are the external forces affecting your business, such as economic changes, social trends, and competitors.
Another tool that you can use once you’ve completed your SWOT analysis is the Ansoff Matrix. This outlines four different strategies you could employ to grow your business.
Market penetration
This is where you focus on growing the sales of your existing products or services in existing markets to increase market share. This is considered the lowest risk of the four options, because you know that what you have to offer works, and you have experience in that particular market. Potential approaches here might be to adjust prices, increase promotion, or add distribution channels.
Product development
Product development is where you develop new products or services for existing markets. This is a slightly riskier strategy than market penetration and requires a good understanding of your current market.
Market development
A market development strategy involves selling existing products into new markets. This could mean targeting new customer segments or expanding into new regional or international markets.
Diversification
This is where you launch a completely new products or services into new markets. It is the highest risk strategy of the four options, as your product is unproven and you may not be especially familiar with the market.
3. Plan for growth
A business plan is a useful tool at any stage of business. It can help you to clarify and deliver your growth strategy, and it is often a must-have if you are planning to raise external finance. If you don’t already have one, you can find out how to write a business plan here. If you created a plan when you first started your business, now is a good time to update it.
As part of producing your business plan, you’ll need to conduct market research. Even if you had a plan when you started, it’s a good idea to take stock of the current state of the market. How are your competitors faring? Are there are any new entrants? It’s vital to understand the current market you want to operate in before you put your plan into action.
You’ll also need to plan your finances down to the last detail. Even though your cashflow is likely to be healthy, how will this be affected by your expansion?
Putting together a cash flow forecast will help you get a better picture of the money going in and out of your business. You can find useful information, examples, and templates to help you create a cash flow forecast on the Business Wales website.
4. Hire and train employees
As your business grows, you may need to hire additional employees or provide training to existing employees to increase capacity or fill any skills gaps.
Having a great team around you is critical to the success of your company, so it’s also important to keep them happy and motivated. To find out how to retain employees and enhance your employer brand, read our guide to employee retention.
5. Consider how to finance your growth
Working out how to fund your expansion is an important consideration. While you may have the option of reinvesting your profits into the business, this may not cover your vision for growth.
Even if your cash flow is healthy, you might still need external finance to expand your business. There are many potential options for funding, most of which fall into one of two categories: debt or equity. You can find out all about debt and equity finance here and the pros and cons of each.
If you’re considering getting finance, read our 5 tips for applying for a small business loan here.
6. Work with a business mentor
Even though you’ve proven that you can successfully get a business off the ground, you may still benefit from having some support.
Expanding a business is a great time to work with a business mentor, as they can provide experience, contacts, and a fresh perspective to help you devise and deliver your plans for growth. You can find out more about what business mentors can offer in our guide, Does your business need a mentor?
If your company is based in Wales, it’s worth knowing that Business Wales runs a mentoring programme for business owners who want support from an experienced businessperson. If you need help to market or grow your business, implement a change, or deal with a particular challenge, then this programme could give you invaluable guidance.
