It’s the dream of many a small business owner – rapid growth and healthy profits.
Unfortunately, profits don’t always follow the growth, especially if expansion happens rapidly without proper planning to back it up.
In order to take full advantage of growth, your business needs to manage it in an ordered, progressive way.
Check out some common pitfalls awaiting the unwary business owner who blunders in too soon.
- Cash flow problems
It’s relatively simple when you’re small, isn’t it? Your business figures are far easier to read, contain and analyse. There are limited sources of both revenue and finance, and it’s not hard to monitor a set range of costs.
All that changes when your customer base grows, new sources of revenue start popping up, and a whole new set of costs arises with the need to buy new technology and employ more staff in order to keep up with increasing demand.
It’s not long before monthly expenses start exceeding your credit limit, especially if customers aren’t paying you on time.
- Finance costs
It’s very tempting to take on new loans before you’re ready. That great new business loan might seem like a magical source of finance, but it comes at a cost.
Any new bank loan or venture capital requires regular repayments – whether you’ve had a good month or not. And if there’s a sudden seasonal downturn in trade, you could be caught out.
Don’t be trapped in the spiral of having to get a new loan to meet the demands of the old one – plan it beforehand with the help of your accountant.
And don’t go on a spending spree with your financial ‘windfall’ – if you fritter it away, remember you still have to pay it back.
- Costs increasing faster than revenue
Increased revenue is not the Holy Grail in itself. Business costs have a habit of increasing and, if they’re outpacing your revenue, your business could be in trouble.
You need to do a detailed cost analysis, ideally before you grow your business. But if things seem to be spiralling out of control, it’s not too late.
Sit down with your accountant and nut out the fundamentals of your business costs – find areas of over-spending and work on bringing them down.
- Sales are up, but profits aren’t
There are several reasons why your profits might be dipping, even if you are making plenty of sales.
The prices of your goods and services might be too cheap. If so, there’s no way your revenue will cover costs, let alone exceed them to earn you a profit.
Alternatively, you might be squandering the money earned on unnecessary items. Again, scan those costs for any outlandish or unwise spending.
- Losing touch with customers
Your business has grown rapidly and you realise you haven’t had a proper conversation with a customer for ages.
Do you still know what’s going on throughout your business? If you’ve taken on new employees to handle the growth, are they representing you well? Have you retained the customers you started with? And are you encouraging real feedback through your website or social media?
- Customers can’t reach you
Any expansion is doomed to failure if your phone systems aren’t up to the task, and customers can’t even leave a voicemail on your overwhelmed answering machine.
Upgrade your phones with a virtual 1800 or 1300 number, which also offers a comprehensive range of call management features allowing you to manage increased call volume and project a professional image with every contact.
With features like call routing and voice-to-email, 1300 numbers from Zintel allow customers to call Australia-wide for the cost of a local call. 1800 numbers encourage customers to call you free of charge from anywhere in the country.
So do your homework well in advance of any business growth, and make sure it’s meticulously planned. Lead your expansion – don‘t let it lead you!