Depending on who you are, starting a Business can be a hard row to hoe. However, once you have some momentum behind you, that can be where things get fun. There are few things as rewarding as seeing a project that you started and have laboured for countless hours begin to take off and grow.
We have all heard the phrase, “it takes money to make money.” In the small business realm, this is the truth. Expansion can be a costly thing. Gaining new talent, retaining old talent, expanding your supply chain, diversifying your product offerings, all these things are can be a part of growth and expansion. But each one of those things will also cost money. And as any small business person knows, there is no such thing as “extra” money.
Today, we are going to examine six tips to help you out on your expansion journey. Get ready, because, after this article, your business is going to be ready to ignite!
Make Sure Expansion is WarrantedTip #1 - time for a gut check. Expansion can be fun. It can be exciting and rewarding. However, before you take any leaps, it is always best to take a step back and ask yourself a few questions first.
Some key questions to ask are:
- Is this just a spike (seasonal, economic, or otherwise) that is going to pass?
- Or will this demand continue long term?
- Are there inefficiencies that could be addressed to provide the needed workforce or resources?
In business, sometimes we get so caught up in the “how” question that we forget to ask the most important question - is this something I need to be doing in the first place? So, take some time to take inventory, ask the hard questions, and see if expansion is indeed the right move to make.
Forecast the Cost of ExpansionLife would sure be a lot easier if we had a working crystal ball, am I right? However, the sad fact of the matter is that we cannot investigate the future and say for certain what is going to happen. However, this does not mean we should not give it a try!
When you have done your gut check and made sure that expansion is indeed warranted, it is time to count the cost of expansion. Surround yourself with your team members and listen to what they have to say. Chances are they will be able to see things that you can’t, and that could save you big time in the long run.
Look at expansion from every angle. Examine every possibility of risk and reward, cost and benefit. Write it out. Understand that good ideas often have unintended consequences. What might those be in this scenario?
Once you have gathered as much information as you can, create a forecast of what you think it is going to cost, then tack on an extra 10%, because let’s face it, it always costs more than you think.
Shore Up Your Business and Personal Credit
- Getting a loan can be hard. Getting a loan at a decent rate can be even harder.
- Gaining and maintaining good credit is a vital step to ensuring that your business can have access to the funds it needs to grow.
On the business side, having a legitimate, incorporated business is vital. Create business checking and savings accounts and be sure to maintain proper balances. Create business lines of credit through local stores. Make sure to watch your credit scores for inaccuracies or fraud. The largest business credit reporting agency is called Dun & Bradstreet. Creating a DUNs number will allow you to set up a profile with them which will most likely be something lenders look for anyway.
On the personal side, the best way to build good credit is by having a good mix of credit cards that you pay on time, every time, while never utilizing more than 30% of your total available credit.
Having good credit will go a long way in helping you finance your small business expansion.
Bank LoansNow that we have gotten all the initial steps taken care of, it is time to look at obtaining info on small business loans to get the money you need to grow your business. Bank loans are, of course, the first stop.
Loans from banks are how lending has been done for years and years. And there is a reason. Because of competition within the industry, financial institutions offer a wide variety of options and are constantly trying to get your business. Make them work for it, negotiate, and shop around for your absolute best option.
But if a traditional bank loan doesn’t fit your style...
CrowdfundingThere are few revolutions in the small business financing arena that has as profound an effect as that of crowdfunding. Through crowdfunding, you do not have to worry about getting approved, mountains of paperwork, or high-interest payments. Instead, you must be a very good marketer with a good product or service that meets people’s needs and provides a solution to their problems.
- A piece of cake, right?
- While crowdfunding does provide a tremendous amount of opportunity when you are trying to expand your business, it is not for everyone.
Alternative Small Business LendersMerchant cash advances, unsecured business loans, peer-to-peer lending, working capital financing, short-term funding, a business line of credit…
Today, there are more options than ever before to get your business expansion funded. The alternatives to traditional funding methods can carry with them a bit more risk. However, if you are willing to do your due diligence and research it out, you have a great opportunity that can open the door to the funding that you need.