Small Business Growth Ideas
One aspect of business planning and growth are the financials and the long-term maintenance of these financials. You have starting capital when you first begin which may be from your own money or borrowed money or a combination of both.
In the beginning, your money will be on a one-way exit out of your business and if you don’t monitor, grow and adapt over time it will be the reason that your business fails.
Simply speaking you need to bring more in than you have going out on a regular basis!
Yes, I know this seems obvious but the number one reason that small business fail is that they run out of money.
The recent blog “How to bootstrap your startup” considered a few relevant start-up topics to save you money.
Increasing sales or increasing prices to grow!
Financial management is not easy, just trying to manage personal finances can be difficult enough and managing a small business can be even harder.
- Trying to make your small business dollar stretch as far as possible without breaking.
- Spending enough so that you have quality and not rubbish is yet another challenge.
- Having money to survive when none is coming in!
More clients to grow
You want your business to grow, and you think your need more clients. “If only I could get more clients my business would be great” This, however, may not be the case.
Your entire business model may be destined to fail simply due to your average sale per customer and poor conversion rate.
- How much is your average sale
- How much of that is net profit (after all fixed and variable expenses)
- Now how many of those each week do you need and is it possible
If your average sale produces a net profit of $10 and you want to have a weekly net profit of $1500, can you make 150 sales each week? Especially if at the moment you are only selling a small fraction of that. If the answer is no or “OMG that’s a lot” then something has to change.
Perhaps your average sale has to change, your product range or more. Either way it is time for a review of what you are doing so that you are not destined to fail regardless of your efforts.
Naturally if you need help with this, please make an appointment to talk to Kelly.
Profit margins to grow
What is your gross profit margin? Remembering that “gross profit” means before your fixed and variable expenses.
Imagine the following scenario for a popular item in your online store:
Item Retail Cost: $100
Wholesale Cost: $80
Profit Margin: 25% ($20 profit / $80 cost)
Now image that, after being inspired by an article on the My Sassy Business blog, you re-priced this item at $110:
Item Retail Cost: $110
Wholesale Cost: $80
Profit Margin: 37.5% ($30 profit / $80 cost)
Our minor 10% increase in prices resulted in a massive 50% increase in profits and gross margin!
Instantly your bottom line has increased, you haven’t had to find another customer and you can even afford to lose a few customers and still make more money.
But you will lose customers!
Remember the customers you want are not the customers who are incredibly price sensitive, these will be the ones who leave every time they find a better deal. Ultimately they are your worst customers, you want customers who are loyal and love your level of value you deliver.
Borrowing to grow
What effect will borrowing have on your cash flow?
– Do you have the cash available to pay it back or will you still be going further backwards by borrowing?
Have you considered if it will fit into your small business budget?
– Borrowing must be a part of your budget and the longer-term plan for your business.
Is it going to be debt finance (bank or lender) or equity finance (owner or investor)?
– Where is the money coming from and will you be able to get it based on your credentials
What is the term?
- 1 year, 5 years will there be a residual etc.
Can the money be sourced cheaper?
- Make sure you shop around.
- Is a credit card, line of credit or overdraft the best way?
What is the money to be used for?
- If it is for a vehicle, how will this vehicle earn more for the business
- If it is for equipment, how will this vehicle earn more for the business
- If it is just for the day-to-day running, you will run the risk of going further backwards if nothing else changes in the business.
Equipment to grow
If you are thinking about buying equipment for your business you need to be cautious that this equipment is actually going to make you more money.
Sounds obvious I know – But it is very easy to think you need the latest and greatest stuff when actually you can’t afford to have it. You need to increase customers or prices before you can look at the new equipment.
Naturally if you have the money or you have budgeted the affordability then yes the equipment is a great way to grow your business.
Now that you have this equipment how will it pay for itself quickly and efficiently?
Back to the business planning and figuring out how to promote the fact you have this new equipment.
Staff to grow
Hiring specialist staff can grow your business, but again you need a plan and budget. You don’t want the new staff member to cost you more than you can afford and then you can’t keep the new staff member.
Just like buying equipment, staff will cost you money and you need a way of bringing in more than enough to cover all those costs plus make your business profits on top!
The biggest danger to growth
Inaction is the biggest danger to your chances of growing. You must be doing something, every day towards achieving your growth goals. Doing nothing will get you nothing, so if you need help get it and start planning to grow.
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