Knowing when to fund growth can be a struggle for most small business owners. For many companies, growth is a choice, not a survival factor, albeit generally an incredibly appealing choice. Some company owners have a very aggressive way of building their companies, while some take an extremely conservative, slow expansion strategy. Irrespective of the approach you choose with your small business, how can you know when it is time to grow and how can you tell when borrowing funds to fund expansion is a good idea?
1. Your market share is increasing: A market share on the increase may be a fantastic chance to expand. By way of example, if you are a plumbing contractor and house building projects are increasing, it may be time to bring in yet another plumber or two to fulfil the possible growth in demand.
2. You locate a complementary product which may boost turnover: Occasionally chances for growth come from related products or services that you can add to those you currently provide.
3. Your existing customers wish to purchase more: Increasing capability to accommodate your clients’ desire to purchase more is a challenge many company owners wish to confront.
4. You’ll need more space: Occasionally growing out of your present space is a fantastic reason to grow. As your company grows, your clients grow, so you need more stock, expanding your premises or moving into a brand new one will promote expansion.
Market variables like those cited above are reasons several small business owners think about growing, but how can you know whether it is worth the chance to finance that expansion?
1. You presently have a profitable company with positive cash flow:
Increasing cash flow to grow is a whole lot easier if you have a profitable enterprise. A lender wants to understand you can make the periodic payments related to the loan. You should have the figures worked out before seeing your bank or other lending institution.
2. You have a distinct vision and a comprehensive plan for how you are going to spend the additional funds to help growth:
Ensure that you’ve considered how you are going to use the borrowed funds to help your company grow. Have you got a projected ROI for your borrowed funds and do you understand precisely how much you will need? The better you are able to answer these questions, the more likely the borrowed funds will be enough to do what you need it to do.
3. You’ve got systems set up to manage the additional finances:
If you are not sure how you are going to handle the extra business, it may not be a fantastic idea to undertake a load of debt to ease it. If you have a plan and a procedure set up that will successfully adapt to expansion, and everything you lack is being funded, you are going to be in a much better position to leverage lent funds to fuel expansion.
Many businesses fail because they don’t grow, attempt to grow too quickly or try to grow at the wrong time, recognising development opportunities is a significant part of having a small company. Understanding when it is a good time for your business to access financing opportunities is a vital part of building a prosperous business.