Growing Pains: Solving the Problems of Thriving Businesses
You’re growing your business, but like most business owners, you’re running into a problem. Actually, you’re running into several problems. Cash flow, taxes, and where do you find the time to start planning for your future retirement?
Most businesses rely too heavily on loans and believe that their business is the ultimate retirement plan. But, businesses are good at building up revenue, not maintaining or hoarding cash. For a business, cash is an unproductive asset. And, at the same time, it’s necessary to have on-hand for lean times and for research and development opportunities.
Here’s how to manage it all.
Your Market Research Is Never Over
Most businesses look at market research as a one-time deal. It’s not. Your market is constantly changing, believe it or not. It’s not something you just leave up to chance. When researching, you need to keep in mind that, as your market matures, certain aspects of that market will change.
For example, your demographic might shift. When selling to young people, you will constantly have to stay on top of social media (and other) trends, because younger crowds tend to follow them – and things can change from year to year.
For older generations, you’ll have to keep pace with how the culture ages. If you keep selling to the same people, and don’t shift your customers to younger generations, then you may find that people’s needs change over time. What someone wants at 50 isn’t the same as what they want at 60 or 70.
So, if you sell a service, for example, you might find that that service doesn’t meet the needs of the market as they age. So, naturally, you either need to develop the service until it does or switch focus and attract a younger crowd of people.
This can be expensive if you’re not prepared for it.
How To Deal With Growing Pains
If you’re growing too fast, you’ll know it. These are your growing pains.
You won’t be able to keep up with customer service calls, you may not be able to keep up with suppliers or suppliers may not be able to keep up with you, you may have trouble getting orders to ship on time, and you’ll generally get negative feedback from prospects and existing clients.
Slow down. It’s OK. You don’t have to take off at a blazing speed to be successful in business. Many business owners, especially small businesses, like the idea of money pouring in from all sides.
But, they don’t know how to manage it all, how to quickly hire and train staff, and how to make sure that the core operations don’t suffer.
It may make sense to bring on an outside HR company to help you ramp up operations. HR companies exist to provide external support for payroll, hiring, and training. A fast-growth company often needs this type of support to prevent implosion.
When You Have Financial Problems
It’s not uncommon for growing businesses to experience cash problems. It seems counter intuitive. You’re growing. Logically, you must have money. But, it doesn’t always work that way. In fact, often, you find yourself with a lack of adequate capital. Why? Because your expenses are also rising. Sometimes, they temporarily rise faster than expected, squeezing your profit margin.
You should already have a line of credit open with a bank. But, if you don’t, this is one of the first things you’ll want to do. If you’re like a lot of business, you’ll have trouble, at first. The secret to reducing friction on financing is to have the business start saving money, and pushing capital to the owner outside the business.
Why is this so important? Because banks often look to the owner’s personal financial situation before making a final decision on financing. Since the business owner is the one who is ultimately responsible for the success or failure of the company, the bank is going to want a personal guarantee on any financing.
And, a business owner with savings has already demonstrated his or her ability to be financially responsible.
For example, if you’ve gone through the process of getting Hamptons International info, recently purchased a home, and have accumulated a substantial safety net, the bank is going to look favorably on this situation. Money in the bank, plus equity in a home, equals financial stability.
Most business owners don’t need to make dramatic changes to their lifestyle. They just need to make small tweaks to how they’re doing things right now. So, if you’re struggling with the prospect of growing your company, just know that you can do it. And, all it’ll take is a little mental fortitude and some forethought.
Riley Moore is a freelance business consultant who has many years of experience working with small start-ups through to multinational corporations. He shares his business knowledge by writing articles for various business publications, both offline and online.