Now for one of the most important topics in business: growth.
This is a topic close to our hearts. As finance specialists, we help businesses grow every day. It’s also relevant to us, as we ourselves have grown substantially since starting in 2020.
That means we’ve seen the joys and challenges of business growth from both sides. We’ll be focusing on those challenges today. But first …
Why business growth is important
On one level, this is simple arithmetic. Your costs will continuously increase with inflation and wage increases. Therefore, you have to increase revenue to keep up.
Also, what if you don’t grow but your competitors do? They’ll have more buying power, more pricing power and more resources to invest.
These are “negative” reasons. There are positive ones too. If you grow, then you could be the one with more buying power, pricing power and resources! Also, bigger businesses can diversify into other areas. This is a form of risk mitigation – or, in plain English, not putting all your eggs in one basket.
Three challenges of business growth and how to approach them
So, businesses have to consider growth. Here are three challenges you have to face – and you’re best off facing them early.
1. How to grow
As they become established, businesses will often grow organically. It’s a great feeling when new prospects seek you out, instead of the other way around. Planned growth can be a little more daunting though.
We won’t pretend there’s a one-size-fits-all approach, because it depends so much on your sector and skills. But ultimately, you’re going to be investing, whether it’s in new recruits, assets or partnerships. To secure a return on any investment, you need to do the groundwork.
That means a business plan with some research behind it. It means getting your accounts in order and forecasting your costs. There’s always risk with investment. In order to manage it, you have to understand it. This allows you to make informed decisions about how much you need to invest, how much you can invest and the best way to fund it.
2. How to scale
Here’s a common scenario in start-ups. The directors are pretty much human databases. They know every client by name and personally oversee every process. That’s normal. But here’s the thing: once you grow, you can’t be on top of everything in that way. It might be possible to oversee every detail with 10 clients. With 100 it just isn’t.
What’s tricky here is that you probably can’t scale up recruitment and new business at exactly the same rate. Say you’re a service provider with 5 employees and 10 clients. You might want to double the number of clients, but can you just snap your fingers and double your team?
Probably not, and this is a typical dilemma in growing businesses. It’s the reason why you need to look seriously at your workflow and processes, whatever you do. Bottlenecks are best addressed early. Otherwise, as you expand they’ll only grow in complexity and cost. That critical balance between quality and efficiency is hard to strike, but necessary.
3. When to grow
Imagine you have a fleet of ice cream vans, and want to invest in a new one. Now imagine making that investment in November. It probably won’t generate revenue until spring or summer in the following year. Until then it’s all cost.
The point? Timing matters. A good plan can only be executed at the right time. Two things need to click into place. One, you need to be ready. And second, you need to try to understand the demand that’s out there. If you know your market, you’ll have a much better understanding of when to make that plunge.
Final thoughts
Starting a new business is daunting but exciting. Exactly the same is true of growing an existing business. On the one hand, you’re making those steps to increased revenue and stability. On the other, it’s never without risk.
That can be stressful, but it’s absolutely achievable. Our final piece of advice is this: be honest with yourself about what you can’t do alone. There’s professional support out there for every area of business, from accounts to management consultancy – and of course our speciality of finance.
If you’d like any advice on funding or how to grow your business, we’d love to hear from you.