How to nurture your business through each stage of growth
How to nurture your business through each stage of growth The process of growing a small business to maturity can be a lot like raising a child: some key principles remain constant, while others require adapting to your business’s changing needs. Commitment is always paramount, but where you invest your time and energy must evolve. Many start-up owners, for example, excel at the hands-on approach of driving all business tasks and decisions, but cannot “let-go” and delegate when the business grows larger. Similarly, established company managers often fail at the nitty-gritty when trying their hand at entrepreneurship. Outlined below is a guide to managing the challenges at every stage.
Stage 1: Inception
Inception is all about ideas and research. What is the product or service you are going to provide? Does it fill a gap in the market? Is it something totally novel, or does it differentiate itself in another way? This is where the value-proposition – identifying an existing or potential demand you will supply – is vital. The now-giant Netflix rocketed to success not by supplying something entirely new, but by providing unparalleled convenience.
Stage 2: Starting up
The first phase of a start-up is putting the inception plan into practise. Your business – driven by you – must procure customers, raise capital, purchase equipment, hire staff, and meet delivery deadlines. This phase is primarily about establishing the viability of your business: that there is a demand and that you can supply it.
Stage 3: Surviving growing pains
The next phase is transforming viability into survivability: the first major period of growth. This involves expanding the platform, building your customer-base, and crucially, managing cash flow. Surviving requires generating enough cash flow to finance growth, such that you begin receiving returns on your asset and labour investments. Whether you can achieve stable growth in this period is crucial to the long-term success of your business.
Stage 4: Managing a successful business
A business that has grown to this stage is fairly stable: it is large enough and has a sufficient client-base to turn a consistent profit. It is also a crossroads where you must decide the future of your business: whether you want to expand or keep things ticking over steadily. In either case, it is the point where you need to start substantially delegating decision-making to employees and having formalised systems in place to keep the company operating – such as for finance, marketing and production schedules.
If your aim is to keep the company steady – perhaps with slow growth – then your focus should be on creating simple systems that maintain stability, and competent managers to make basic decisions. If you plan on opening other businesses, getting your company to this stage allows you to focus your time elsewhere, with peace of mind that things are running smoothly.
Stage 5: Expansion
Further expansion may be part of a continuous long-term plan, such as expanding into new markets – or it may arise due to a new opportunity, such as rapid economic growth. Either way, you need to be prepared to tackle the pivotal challenges involved.
Owners must take on a more active approach in decision-making, but also employ talented managers to aid in creative and strategic solutions. Planning systems must expand from operational into strategic. Focusing on these core-processes should be facilitated by delegating or outsourcing time-consuming tasks. Finally, you need a financing strategy that can carry this rapid growth – and the sizeable costs involved – without either creating a production bottleneck or causing severe cash flow problems.
Supporting growth through intelligent financing
For SME owners, navigating growth – whether in the early phases, consolidation or expansion – is always challenging. Firstly, it often involves doing several different jobs at once. Secondly, since in most cases your sales will be on credit terms of 30-120 days, you are left with a chicken-or-egg cash flow dilemma. You must increase your business output to grow revenue but need cash on-hand to cover greater expenses. Without an extensive credit history to demonstrate your capacity, getting a bank loan can prove unfeasible.
Factoring offers a welcome solution. The factoring company purchases your accounts receivable from your business, collecting these from your clients when they are due – meaning working capital is available to you as quickly as you can increase sales.
When you partner with Merchant Factors, all debtor administration and credit control services are provided for no extra cost. With your finances taken care of, you can focus on growing your business to its full potential.
For fast, flexible business finance – contact Merchant Factors today
Finance beyond the Numbers.