Many people start a business with the hope that their small idea will turn into something bigger. They plan to expand and grow, but then when the expansion happens, many business owners aren’t prepared. They struggle to navigate business growth.
Growth is great, but it comes with challenges.
If you don’t manage growth properly, it can negatively impact your business.
To make sure you are prepared to handle the changes that arise in your business due to growth, here are six factors to pay close attention to as you attract more customers, make more sales, and expand your business.
6 Factors to Be Aware of As Your Business Grows
By paying attention to these factors, you will be better able to navigate business growth and support your business as it grows into its next chapter.
Cash flow
One of the number one reasons businesses fail is due to cash flow problems. This fact is especially true for growing businesses. As a business expands, it can become more and more difficult to manage revenue against costs. Growth often requires new spending and investments, and you must balance new expenses with incoming revenue.
Related: 12 Causes of Cash Flow Issues & How to Fix Them
Overhead costs
As your business grows, so will your overhead costs. Overhead costs, the expenses incurred to run your business, increase as your business produces more output and serves more customers. You will need more employees, tools, equipment, office space, commercial space, and other resources as your business expands.
Credit
Your credit needs will change as your business expands. To be prepared to manage growth, monitor your credit score and limits. Paying bills on time, fulfilling financial obligations, and maintaining good relationships with creditors are vital. A good credit score increases your chances of securing favorable loan terms, lower interest rates, and higher credit limits.
Pricing
As your business grows, factors may cause you to adjust the pricing of your products and services. In some cases, you may choose to lower your pricing if you want to capture a larger portion of market share or if cost of goods comes down as you scale. In other cases, you may want to increase pricing as your brand reputation and perceived value rises or as you add new product lines and service offerings.
Tax implications
When your business changes, your tax liabilities will also change. Pay attention to what new revenue and new expenses can do to your tax liabilities. Don’t assume your tax liabilities will stay the same as your business evolves.
Related: 7 Reasons to Start Year-End Tax Planning Right Now
Your team
Most small business owners start off doing it all. They are responsible for sales, marketing, production, human resources, financials, and practically every other aspect of running the day-to-day operations of the business. But at some point, a business owner must give up some of these tasks as the business grows. You need to focus on building the right team to support your business growth.
Related: 60+ Small Business Hats You Should (& Shouldn’t) Be Wearing
How to Navigate Business Growth
Growth comes with challenges. But the good news is that you can overcome those challenges with the right approach and strategy. Here are a few ways to remain steady and successful as you navigate business growth.
Track your financial metrics.
The number one way to manage the growth of your business is knowing your numbers. When you have a clear view of financials, you have a clear view of your business, where you are, and where you are going.
Related: The 6 Essential Financial Metrics Every Business Owner Must Know
Monitor cash flow.
A way to prevent the cash flow crunches that can accompany business growth is by using cash flow formulas. Cash flow formulas determine how much cash is being paid in and paid out of a business. The formulas help business owners see their sources of income, amount of spending, and current and projected account balances.
Use financial forecasting.
If you want to move your business forward, you need a map. Financial forecasting is the process a business goes through to create a projection of their financial future. It provides a roadmap of what to expect financially as your business grows.
Related: Build a 12-Month Plan to Make Your Business More Profitable (Free Worksheet)
Create a budget.
Keep your business healthy as it grows by setting a budget that directs your spending. A business budget ensures that you only spend what you can afford. It keeps your expenses in check, while projecting your on-hand cash so you can better see the current state of your business and predict the future state of your business.
Related: Build an Accurate Business Budget In 8 Simple Steps
Negotiate vendor contracts.
As your business grows, you create new opportunities to get better deals with suppliers and vendors. Consider if you can negotiate better terms and pricing, and explore options to obtain volume discounts, new payment terms, or long-term contracts that can lower overhead costs.
Establish a credit line.
Credit can be a strong support system as your business grows. Don’t wait until you need it to get it. Establish a credit line you can pull from if you find your business in a cash crunch as you expand.
Get professional financial support.
Find a financial partner who can help you execute the tasks to manage growth. As you navigate business growth, find trusted financial partners such as an outsourced bookkeeping team and outsourced CFO to guide you through your growth stages and beyond.
Get Support for Your Growing Business
Growth is the goal for many business owners, but it can also be one of their biggest challenges.
As a business grows, needs expand and operations become more complex. Make sure you are prepared.
To navigate business growth, keep an eye on these factors and make a plan to manage them. If you need support during your business’s growth stages, CFO2U is here to help.
Get a financial team by your side to support your growing business. Schedule your free call with our team today to see how our outsourced financial services can be the perfect fit for your growing business and needs. Schedule your free discovery call.
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