Growing your business and taking it to the next level is an exciting time. There are so many ways to grow your business, including hiring more people, obtaining new technology, expanding your space and creating a more robust digital presence. The question is, how do you know your business is ready? Here are the top five signs your business is ready to grow.
1. You have had at least three to five years of consistent financial growth
Before you decide to grow your business, you want to make sure you are in a good place financially and have strong potential for long-term financial growth. While just one year of profits – gross income minus expenditures – shows your business is doing well, having at least three to five years of increases shows consistency and indicates financial sustainability in the future.
Another financial indicator is that you have steady, positive cash flow and your short-term financing is no longer keeping up with your business needs. For example, if you are selling inventory at record amounts with increasing profits, but your short-term financing is insufficient to fund your growth, you may be ready to expand.
2. You’re having a hard time meeting demand
Having more demand than you can supply is a sure sign your business is doing well. However, many business owners mistake this for the only indicator they need to grow their business. Although it’s a strong indicator, it’s important to first determine if the high demand is temporary or if it’s sustainable for years to come. Similar to showing three to five years of financial growth, it’s important to show multiple years of high demand with reasonable belief demand will continue.
If you’re not sure demand will be sustained, consider more temporary expansion options to meet demand right now. Examples of less permanent strategies to meet demand include leasing technology or workspace instead of buying, and using subcontractors or freelancers instead of hiring employees. These allow you to test future demand without making a large investment up front.
3. You have new market opportunities
When assessing new market opportunities, it is important to first identify the strength of your industry. If you operate within an industry that is booming, it will be easier to grow your business. Conversely, if your industry is fading, expansion may be difficult because it might not be sustainable. However, a more stagnant industry could be an opportunity for your business to focus on expanding your product or service offerings.
Another great way to identify if your business is ready for growth is to simply listen to your customers. Are they asking for more products, expanded service hours or additional locations? If they are, it can be a strong indicator it is time to grow to meet those new needs.
Finally, is there a component in your supply chain you could begin producing yourself? By controlling more of your supply chain, you can reduce your costs and risks and ultimately increase profits.
4. You have run projections and they look promising
When creating a business plan or considering expanding your business, it’s vital you run projections on your plans. Projection calculations look different depending on the type of business and industry, but most include a sales forecast, expenses budget, cash flow statement and balance sheet to confirm there will be – and when there will be – a return on investment. Lenders and investors also often require these calculations.
5. You have a team you can rely on
Your business wouldn’t run well without a supportive team, and it certainly won’t grow without one. If you are thinking about growing your business, first look at your management team. If you have a strong, stable management team that is just as excited about your business model and potential growth as you are, that is an excellent sign you will have the right support when it comes to expansion. The same goes for your employees. Are they excited about the prospect of more business and opportunities to advance their careers? If you can’t identify these qualities in your team members, you may want to set the growth plans to the side until you are sure you have a strong team that is ready to grow with you.
Your advisors are another crucial part of your growth team. You may need an accountant to confirm your financial growth over the years, a banker to provide that next line of credit to expand your company, an equipment finance lender to help you obtain new technology, or a real estate professional to help you select a new location. These partners are important because they serve as your advocates, helping you avoid any pitfalls during your expansion and put you on the path to success.
Ready? Set. Go!
If you have demonstrated financial strength, see market opportunities and have a great team at your side, it may be time to put your growth plans into action.