If you're thinking about growing your business, chances are you're focused on the destination: more customers, a broader reach and ultimately a bigger profit. But the road to expansion can present new risks and demand new sacrifices. Putting a few safety nets in place before you embark on the journey can set you up for success and catch you if you stumble.
Bild & Company, a national healthcare consulting firm based in Clearwater, Fla., assists healthcare providers with marketing, staffing and training. When the recession hit, Traci Bild, the firm's owner and author of the book Seven Steps to Successful Selling, decided to look at it as an opportunity to reach more clients. The business was already earning a steady $750,000 annually helping struggling businesses turn their profits around, so why not expand? “I made the decision that I'd worked too hard to go backwards,” Bild says.
Make a plan to support your growth However, the reality of growing a business is more complicated than the dream. As a business consultant herself, Bild understood that if she didn't have the answers, she needed to find someone who did. “I spent $250,000 on a business consultant to look at our company, show us our weak spots and help us make them strong,” she says.
When the growth finally hit, it hit hard, requiring more investments into infrastructure. “We spent $28,000 on customer-relationship management (CRM) software for our sales department in one quarter,” Bild says.
As her profits grew, she consulted with her bank about investment options and products that could help the business run more efficiently. A personal banker recommended a lockbox for client payments, which improved accounts receivable.
Anticipate cash flow challenges and unexpected expenses Too rapid growth can be a challenge in itself. “People think growing a company means making more money, but that's not always the case,” Bild says. In order to grow, many businesses must hire additional staff, purchase new equipment and expand their facilities—often before seeing a single dime.
If you anticipate rapid growth, you may wish to take out a line of credit, in case cash flow tightens. Business term loans are also available for successful businesses looking to fund an expansion into another market or to start a new project.
Even when profits are high, expenses can come out of nowhere, so it's a good idea to pad your savings. For Bild, one tax bill completely wiped out one of her accounts. “Luckily I had enough profits saved to pay the bill. Owing money to the IRS is not a position you want to be in,” she says.
Positioning yourself for future growth can feel like throwing money down a well, but there's also risk in not doing it. “If we hadn't set ourselves up, we wouldn't have been able to deliver on our promises to our customers,” Bild says.
For Bild & Company, the risk paid off: From 2008 to 2012, its earnings doubled every year, putting it on Inc. magazine's list of fastest growing companies. In 2014, it'll sign its first million-dollar contract, and Bild predicts revenues will hit $6 million this year. “You really have to know why you want to grow and then map out how you're going to get there,” she says.
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Once small business owners have secured start-up funding and composed a business plan, the next step is building a client base. Getting the first client is critically important, because it proves out the business model and presents growth opportunity.