When your business is in its infancy, you tend to it with great care. You nurture it. You carefully work out your business plan. For as long as you can, you do everything yourself and as long as everything is getting done, this is the most efficient use of your resources. You may be satisfied with the level of income you make as a one-person, home-based business and decide you don’t want it to grow beyond that stage – there’s nothing wrong with that. If you do hope to expand your income and grow your business, however, you must go beyond start-up and start thinking strategically about how to move your business toward growth and expansion.
If you know you’re going to want to grow your business, it’s wise to begin planning how that will happen early in your business. You won’t be moving toward growth for a while, but if you plan to expand in year three, knowing where you need to be in order to do that helps you set goals and milestones along the way that will prepare you for that next step. Initially, however, you need to take care of your business in its early stages so it’s ready to grow when the time comes. Here are some strategies to prepare you for business growth.
In the early stages your business is all-consuming. It takes up most of your thoughts, your energy, your time and your resources. When you first start out, make sure your life has room for the energy your business will require. Don’t enter into a lot of commitments outside the business. Take care to create space in your life for things outside of work, but recognize the toll it takes during the start-up phase.
This is not the time to embark on aggressive marketing or advertising campaigns. Wait until you have the business resources to satisfy the demand you will create. Your business can crash and burn if you take on more than you can actually deliver.
When setting your pricing, make sure you include a wage for yourself in your overhead costs and add a realistic profit margin (say 15-20%). Remember, price = costs plus profit margin. Many small business owners simply look at income and expenses, without recognizing the need to create a salary and a profit margin. I’ve heard business owners say, “If I make money this month, I’ll take some out of that to pay myself.” Your goal should be to create a sustainable income from your business, preferably an income that will grow as your business does; that will never happen if you don’t begin paying yourself as part of the cost of running your business.
Your business’s profit does not belong to you; it belongs to your business. This is a very important distinction. Your salary or wage should be covering your expenses, and the money your business makes above expenses should be invested back into your business. This is where your funds for expansion during the next growth phase of your business will come from. It is an important strategic aspect of business growth.
It may be tempting, when you’re starting your business, to go out and buy the newest and best of everything but it may not be the best use of your resources. If you’d like a snazzy new printer but your old one works fine, stick with it until you really can afford a new one. Barter for services until you are able to pay someone to perform them. You may decide a new laptop is a necessary start-up cost, but be honest about what you really need. Perhaps a $750 laptop will do you just fine, even though you may be tempted to get one with all the bells and whistles for $3,000. If you spend cautiously at the beginning, you’ll have more available to you later to upgrade as you need to. If you break the bank in the first few months, you’ll be in trouble if your cash flow doesn’t meet your anticipated expenses.
Somewhere between the one and three-year mark, you will notice that your business may be levelling off. This is an indication you’ve stretched yourself and your resources as far as they can go. On your own you can’t take on any more clients or generate any more revenue. At this point it’s time to make the conscious decision to grow your business. This may mean expanding your product line or services, or hiring staff and taking your business to the next level.
Moving beyond the one person show can be a scary prospect, but if you’ve taken care of your business during its first few years you’ll be well prepared to take this next step. Follow the plan you prepared when you started your business and move forward with confidence as your baby grows into an adolescent, and eventually a grownup business!