When and how to grow a business is one of the biggest challenges faced by small business startups. If you try to grow too fast and invest too much, you may have serious cash flow issues. If you grow too slow, you will miss out on opportunities and your competitors will take market share that could have been yours. In this article, we will give you five tips and tricks that will help you give your business a successful growth strategy as you move forward.
When to stay lean
1. Avoid large fixed expenses right upfront
Once your business starts growing, it can be tempting to start spending that money right away on large fixed expenses like dedicated office space. Of course, there is a time and place to invest in large fixed expenses. But, if you invest too quick, you may end up spending too much and jeopardize the day-to-day cash flow you need to run your business.
Initially, try to stay as lean as possible with your fixed expenses. There are so many different options out there when it comes to expenses related to small businesses. For example, instead of leasing dedicated office space, you could:
- Work from home – If you have a dedicated office space in your home, you can even claim it as a deduction on your taxes.
- Use a co-working space – You can have your own workspace in a professional environment without the high fixed expense associated with your own private office space.
- Work from coffee shops – They have WiFi, sell great snacks and caffeinated beverages, and generally provide a semi-quiet and focused environment for working.
2. Use freelancers to supplement your workforce
With today’s connected world, freelancers are a viable option for developing your business potential without having to hire a bunch of full-time employees. This is a huge help for small business owners, many of whom need specialized help only on-and-off, especially during the startup phase. That’s where freelancers come in.
Let’s say you need content written for your website but cannot afford a full-time writer. A freelancer is perfect. You can tell them what you want and pay them by hour or project. In most cases, you only pay in full when the work is done, meaning you don’t pay unless the work is satisfactory.
3. Leverage technology and SaaS options to minimize initial expenses
Another way to keep initial expenses down is to leverage technology and software-as-a-service (SaaS) options to help manage tasks and make your business more efficient. For example, instead of paying a bunch to use a videoconferencing service, you can use Skype or Google Video Hangouts for free.
SaaS options can really help when it comes to cash flow as well. For example, if you want to use Quickbooks but cannot afford to pay the $200-$350 in one lump sum for the desktop software, you can use Quickbooks Online and pay $10-$20/month and have all the same features.
When to go big
1. When the time comes to hire, invest the time and effort necessary to find a great employee
You are going to reach a point in your business where hiring employees becomes necessary in order to take your business to the next level. You should not be afraid of this. A great employee has the potential to transform your business and spur exponential growth. This is not the time to skimp, this is the time to go big and shoot for the best employee possible.
Where a lot of small businesses err is they are afraid to actually take the time necessary to hire the best employee for their business. Instead, they hire quickly to save time and end up hiring someone who is not a good fit. If your business skimps on the hiring process, you will eventually have to fire that employee and hire another if you really want your business to grow, meaning another huge time and money investment that could have been avoided upfront. To get the best employees, make sure you put together the optimal job description and place it on the right job board.
Another common problem is to settle for a good employee (does their job, is trustworthy, etc.) when you could have waited and found a great one (innovative, on board with your company vision, willing to go the extra mile, etc.). By taking the time and effort to really vet and screen possible employees, you will save a huge amount of time in the long run. Also, you will have the employees and team in place moving forward that have the ingenuity, drive, and ability to take your business to the next level.
2. Don’t be afraid of spending money to make money
As mentioned above, initially it is good to try to keep your fixed costs down. But the old adage, “you have to spend money to make money,” is quoted so often for a reason. You will reach a time where your business will have to invest some money to grow. The problem is for many small businesses there is not excess cash lying around to get that important piece of equipment or spend the marketing dollars to take the business to the next level.
In this case, there are some other short-term ways to get some investment cash. One such example is invoice factoring, where you get paid ahead of time on your invoices by a company that then later collects on those invoices from your customers.
The important thing is that when you do any kind of short-term loan for your business, you should be spending it on something that has potential to quickly be making you a return, because short-term loans generally have pretty high interest rates. Some examples might be a piece of equipment that could double your production. Or, maybe taking out a loan to hire your first official salesperson (who has a high potential to quickly be making the company money). Just be sure to have a solid backup plan in case something unforeseen would happen.
In general, try to stay as lean as you can for as long as you can, especially when it comes to fixed expenses. But, if you have a solid opportunity to invest some money or get a loan to purchase something to take your business to the next level, do not be afraid to spend money. Just do your research, take the necessary time to think it through, and cover your butt with a backup plan.
Digitalization is changing businesses of every size. Learn how and where it can impact your organization in The Digital Economy Infographic.