As a small business owner, how do you know how much you want your business to grow? We are all usually in the mindset to grow, grow, grow. But, what is the end goal?
I think it is important to know the answer to this question at the beginning. And I believe there are important considerations as you decide.
- How much money are you starting your business with? Capitalization is extremely important in achieving growth goals. Without the funds to invest in sales and marketing, you may not see the growth. You may spend less, but eventually your capital still runs out.
- How high are your personal expenses? If you have high personal expenses, it is difficult to fund your lifestyle with a start-up bootstrap business. The alternative is to get a small business loan to carry you through a couple of years. This puts you in debt, though. I would consider significantly reducing your personal standard of living, which would result in you needing less during the start-up years of your business.
- How much of the initial profits of the business are you willing to invest back in your business? Most people start a business without enough capital and high personal expenses. This creates a black hole, consuming all of the company’s profits. This also develops a circular pattern. Your business starts well and you use all of the excess to live off of and then you don’t have capital to reinvest in growth. Even if you are bootstrapping (pay as you go strategy), as long as you are able to leave most profits in the business, you can continue to grow. It may be slow, but it is progress.
The higher your monthly breakeven point (the amount of revenue required to cover your fixed expenses), the harder you have to push growth in order to cover it.
6 Steps To Grow Your Business
I have a perspective for you to consider.
I believe you can choose how to grow your business, not just respond to it happening. I believe that we can enjoy running our own business and fulfill our purpose for starting it to begin with. Here is how:
- Determine the answers to the above questions in advance. I mean decide on purpose. Decide if you need to save money to start. Decide if you need to reduce personal expenses to make it all work. Decide to leave 50% of all profits in the business for the first five years.
- Calculate your initial fixed expenses and determine your breakeven. Combine this with the capital you have to see how long you can operate until you achieve breakeven revenues. Is it doable? It’s okay, I promise. It is better to know than to go in blindly and become a slave to your business and financial concerns.
- Make a monthly budget. I know it sounds boring. But, if you only do an annual budget you may have too much cash going out at the beginning and run out of money before the end of the year to catch up. You need to plan out the year by month.
- Don’t let fear keep you from following your plan. Fear kicks in quickly. When the money flows out, even if it is planned, it is crazy scary. This isn’t another person’s money. It’s yours. Fear of running out makes us change the plan. If we change the plan, we miss out on the growth. You can’t grow a business by cutting expenses. Trust the plan. Trust that you put in the thinking up front.
- Invest cautiously in infrastructure. Don’t go buy a new car or a fancy office at the first turn of profits. Get the people and the systems required to support your growth. You don’t want to stall out because you can’t sretch your own personal arms any further. But be cautious…a strong foundation is essential, however, it isn’t always revenue producing. You need enough to support the revenue growth.
- Then invest back into growth. Put your money into income-producing things. A salesperson. A marketing plan. A revenue generating service technician. With number 5 above, your breakeven revenue is probably higher than when you started. Choose to invest in areas that will create growth.
What You Choose Will Impact You
This sounds elementary, but it is rare that I speak to a small business owner that follows this approach.
The impact of not following this approach can sometimes still work out. It can happen. But it may be because of luck, or timing, or killing yourself, but not necessarily on purpose.
Most times it doesn’t work out. And usually the result is:
- An owner stuck with plateau sales unable to grow beyond their own personal capacity because they haven’t invested back into the infrastructure of their business.
- An owner who is a slave to the current pace because they need the income personally to pay for their high standard of living, leaving them without resources to invest back in the business.
- An owner who shuts down prematurely for fear of losing it all when the investment was all a part of the plan anyway.
I believe in you. I believe you can plan your business and work your plan.
Then you have choices. You don’t have to keep growing for growth sake. Once the equation works and you are profitable, you have a foundation for your business, you have savings and a reasonable standard of living to support so you can focus on enjoying your life. You can run your business and have a life.
You can choose.