8 signs business growth should be on your radar
According to the Small Business Administration, 99.9% of American businesses are small and account for the majority of job creation in the United States. While it may be tempting for business owners to take the next step and grow their company, it's all about timing and having the right direction to achieve sustainable, long-term growth.
So how do you know when the time is right? Here are eight signs your business is ready to embark on expansion.
1. You have a roadmap for business growth
To ensure successful expansion, a business's growth should be planned, intentional and realistic. By creating a business plan, you can home in on your goals and focus on what's needed to prepare for growth. To get started, you should:
Evaluate your business
Pinpoint your growth targets
Conduct market research
Create Specific, Measurable, Achievable, Relevant, Time-bound (SMART) goals
But remember, no business has unlimited time and money, so planning is essential when allocating resources to meet priorities. Working with a trusted business plan writer or financial advisor on plans can be beneficial to prevent leaving important decisions up to chance.
2. Your business is bursting at the seams
If your business growth plan has a second or third brick-and-mortar on the list, seeking financing options like a Commercial Real Estate (CRE) or an Owner-Occupied Commercial Real Estate (OOCRE) Loan may be a solution. OOCRE loans can sometimes provide business owners with unused space, which can be leased to third-party tenants, helping generate rental income, or it can help enhance the customer experience.
For example, a manufacturing company that builds and designs customized doors can rent extra warehouse space to a similar business that needs more room and access to loading docks or storage.
3. You have a team you can count on
Managing a business expansion is a lot for anyone to handle on their own. That's why having a dependable team ready to manage daily operations is crucial when considering expansion opportunities. The true sign of an expansion-ready business is when owners can focus on strategic growth and feel confident delegating responsibilities to team members.
4. Demand exceeds supply
When demand for a product or service rises, it fuels expansion and indicates that the offerings hold significant value for its customers. It also suggests that the business is well-positioned for growth. Suppose your product consistently sells out before you restock, or your services are often overbooked or have waitlists. That may indicate it's time to increase employees or resources to meet demand.
5. Your business maintains healthy cash flow
Consistent positive cash flow can suggest a business is ready for expansion. For one, healthy cash flow and savings can provide a safety net for unexpected costs or growth opportunities. If you need financing, showing strong cash flow and a low debt-to-equity ratio — meaning your monthly gross income is higher than your monthly debt obligations — can also go a long way in making your case with a lender.
6. Your business is profitable
Ask yourself if your business is profitable with its current sales and infrastructure. Despite rising costs, consistent and increased profit margins suggest your business operates efficiently and is ready to scale. Lenders and investors are more willing to take risks and work with financially profitable and reputable businesses.
7. Opportunities exist in your area or industry
You should stay up to date on industry trends and area demographics to keep a pulse on the interests of your target audience. For instance, FirstBank's new video series — ' It Takes Courage ' — highlights six businesses leveraging their banking relationship to tap into market growth opportunities. One featured story dives into Colorado restaurateur and business owner Shi (Ben) Ke, who knows firsthand what it takes to understand your industry and adapt to trends.
Ke recognized Colorado's growing population and demand for trending food concepts like hot chicken sandwiches and build-your-own poke and ramen bowls, especially in high-traffic areas like Denver, Lakewood and Englewood. Instead of focusing solely on one project, Ke opened several fast-casual hot spots. Ke now owns a conglomerate of local restaurants, from Slammin Chicken to Asuka Ramen and Poke and Sizzling Hibachi. With FirstBank's help, Ke was able to finance multiple owner-occupied restaurants to help grow his concepts and build equity in his business.
8. Your business is ready to level up
If you notice demand is outpacing supply, and your industry is on an upswing, one alternative you can consider is merging with or acquiring businesses that provide the same or similar services. It's important to note mergers and acquisitions are most successful when the company has a long history of financial stability, a strong management team, and there is good synergy between both companies. You should always seek financial guidance to ensure your business is set up for success before and after the transition.
When you feel like your business is ready to expand, there are several things you should consider before taking it to the next level. With the help of a reliable business consultant or banking partner like FirstBank, you can weigh your options and take a strategic approach to make your dreams a reality.
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