Owning a business means you’re always looking at when it’s time to take the next step. Whether you have a large goal like opening a new business or expanding your existing one, or you want to take a small step like hiring staff or adding a service or product line, the key to success is knowing when you’re ready to grow. Jump ahead too soon, and you may find yourself with expenses you can’t cover. Our small business accountant are sharing the five signs your business is ready to grow and how you can get ready to take the next step.
When you first started your business, you were probably able to handle everything yourself, or maybe you only had a few people working for you. Or, if you have a brick and mortar store, you had difficulty filling the space during those first few years.
Cut to now, and you’ve seen a consistent increase in business – so much so that you’re having difficulty balancing operations and customer needs, and your staff is struggling to keep up, too. The storefront that seemed so spacious is now often cramped with customers and inventory.
If you are seeing a consistent growth in business and your sales numbers reflect this, it is most likely time to begin planning how you can grow to shoulder the increase and scale upwards.
“You should get a larger space.”
“You’re always so busy, it would be great if you had more people working.”
“It would make a lot of sense if you offered delivery service.”
If your customers are asking for your business to grow, that is a pretty clear sign to grow. It’s important to note that one customer making a request shouldn’t direct your decision, but it may be a smart idea to record customer requests and suggestions over a set period of time. You can see trends in what they ask (or what they complain about) and make your choice there.
For example, if your customers consistently mention space and your sales have increased since you opened your location, you may want to consider a second business location or expanding your current footprint. On the other hand, if customers are asking for a specific product or service and it aligns with your business, it may be time to consider a new product line.
While revenue is great, the amount of money coming in should not necessarily solely direct your growth. Profits, on the other hand, can be one meter you can use. After you subtract your expenses from your gross income, is your business turning a consistent profit that has increased over the past year or longer?
If you can say yes to this, then you can look at either investing some of your profits into your business, ensuring you have enough left to pay your bills and pay your own income, or you can take proof of your success and consider a small business loan.
In addition to profit, your cash flow is another meter you can use to gauge your readiness to grow. Cash flow is simply the amount of liquid assets you have coming into your business through revenue and sales and how much you have flowing out through expenses such as payroll, inventory, and rent.
If you have cash in the bank that you can easily and quickly access to not only pay your expenses but cover emergencies or a downturn in your business, this is a great way to gauge if you can take the next step.
One of the biggest challenges small businesses have when it comes to growth is not being able to scale their business. This simply means being able to increase production or increase the amount of customers being served without sacrificing quality, customer happiness or overextending yourself and your team.
Having systems and procedures in place for operational tasks like maintaining inventory, tracking finances, and training employees means you have a solid business foundation that can then be used to grow.
If you need assistance in generating and analyzing your financial statements, we can help. Our small business accountant in Raleigh will look over your business data and help you determine what steps you can take to grow your success. Schedule a consultation with our CPA firm today by calling us at (919) 420-0092 or filling out the form below.