Does operating your business these days remind you
of spinning your tires? Are you generating a lot
of activity but not moving forward? Believe it or
not, this could be a good sign. It could mean that
you are ready to move from one stage of business
growth to the next.
Experts identify three main stages of business growth.
The Startup Phase is the time when you get your
business up and running, locate customers, make sales
and essentially, try to get money coming in. Typically,
at this point, you are an Owner/Operator.
The next stage is Early Stage Expansion. In this phase,
your business experiences “growing pains” similar to
the ones I will discuss below.
In the third stage, your business moves from Owner
Operated into Management. In other words, your function
is that of manager.You are no longer involved in the
day to day operation of running the business or of
producing the product or service.
Experts claim that only a minority of small businesses
move into the third phase. Therefore, today’s article
will address ways of managing growth as you move from
Startup into Stage Two.
You know its time to look for ways to manage growth
if any of the following apply:
1.You have steady income and regular sales but you
are working too hard. You are investing “sweat equity”.
You know that if you continue working at that speed,
you will burn out, lose productivity or worse —
become ill. It is time to find a way to increase
growth while working less.
2.You are running into cash flow problems. Often,
cash flow problems are caused by the need to invest
in inventory or in product development, or to cover
payroll. However, while money is being spent on the
above items, the payment for sales is delayed until
the product is developed, delivered and invoiced.
That is, you have capital assets (equipment, inventory),
but cash is flowing out faster than it is flowing in.
In this situation, you will need to find a way to
manage by generating an influx of cash while
continuing to develop your products or services.
If it’s time to grow your business, you’ll want
to manage that growth as efficiently as possible.
Try one or more of the following strategies:
a. Existing Customers and Existing Products.
Find ways of selling more products to your customers,
or raise the price or fee. If you have been charging
your customers the same price for a year or more, it
is reasonable to notify them of an increase. Similarly,
there comes a time when you might decide to turn down
low paying work in favor of spending the time looking
for higher paying markets. You might also increase inward
cash flow by strategies such as announcing a sale, or
by offering a discount if people pay
now for a year’s worth of services.
b. Existing Customers, New Products
Keep your existing products, but look for new
customers. Ask your existing customers for referrals,
have a contest or publish a newsletter. Look for
opportunities to reach new customers through joint
ventures or other strategies. For example, if you are
selling web development services, you could locate a
company selling ecommerce software and arrange to promote
one another’s services to your existing customer list.
You will both be using your existing products to reach
c. New Products, Existing Customers.
Develop new products and sell to existing customers.
This is often referred to as developing “back end”
products, and is a favorite approach used by the web’s
more successful entrepreneurs. For example, if you are
currently selling gardening supplies, you might notify
your existing customers that you now have added vegetable
cookbooks or garden ornaments to your inventory.
d. New Products, New Customers.
You develop new products and look for new customers.
Essentially, this means you have a new business, and
like all businesses, you will need to do your homework
and your market research.