Small businesses are a happy bunch right now. According to Capital One’s latest Small Business Growth Index, optimism is at a record high with 67 percent of businesses viewing conditions as “good or excellent”, up from 60 percent a year ago. The majority, 65 percent, cite business growth as the reason behind this enthusiasm followed by national economic conditions (54 percent), and improved business operation (51 percent).
But optimism aside, many businesses find their growth plans thwarted at every turn. Whether it’s due to cash flow issues, access to working capital, or supply chain problems—take your pick! Surprisingly, one of the biggest impediments to growth is the business itself. Many businesses simply aren’t operationally ready for growth—this could because a lack of skilled labor, poor hiring decisions, a lack of competitive intelligence, and so on.
Here’s a round-up of some of the most common barriers to growth and some steps you can take to break through them:
1. Ignoring Business Indicators
Everyone wants revenue growth, but what form will it take and are you ready to grow in that area? Study your business indicators regularly to monitor growth opportunities. This includes your sales pipeline, conversion rates, and market trends.
Things to look out for include success in one market or location and the potential to expand into another. Is a big sales deal on the horizon? Is your pipeline trending favorably? Is success in one area of product development opening new doors of opportunity for others?
If you ignore your business indicators, you won’t be able to capitalize on the opportunity or prepare for growth when it presents itself.
2. Overlooking the Competition
Competition can be a great driver for growth if you approach it correctly. There’s no point making it your mission to be better than the competition if you don’t have a deep knowledge of where you stand against them. A powerful tool for doing this is a simple SWOT analysis.
SWOT stands for “Strengths, Weaknesses, Opportunities, Threats” and refers to a process for identifying all four of these things with regard to your business. This exercise can help you identify what’s working and what isn’t, and where to concentrate your energies.
Use this free SWOT Analysis Worksheet from SCORE to explore the strengths, weaknesses, opportunities, and threats to your business. Also consider the variables that come into play, such as market trends, competition, financials, supply chain, staff, and more.
A SWOT analysis is also a useful starting point for differentiating yourself against the competition and drawing out the value you provide that they don’t.
3. Forgetting About People Until It’s Too Late
To grow you need to surround yourself with great people. But don’t leave it to the point of expansion before you start thinking about who can help you grow. Always be on the lookout for talent. According to a recent Bank of America Small Business Owner Report, competition for talent is intensifying with 58 percent reporting difficulty finding qualified candidates and 25 percent stating that it’s taking more time to fill key positions.
Even if you’re not ready to hire, consider building a stable of independent contractors who can get to know your business well and contribute on an as-needed basis. Once you’re ready to grow they can step in with minimal ramp-up and help you meet your goals.
Another option comes in the form of mentors. Having someone beside you who’s been there before as you enter new territory can be invaluable. Organizations like SCORE can match you with a business mentor for free. Located nationwide or online, these mentors can bring either very specific experience (marketing or HR) or broad business skills.
4. Not Accounting for Risk Early in the Growth Phase
Growth doesn’t come without risk. As you plan your growth strategy, have a “Plan B” in place that accounts for any hurdles along the way that might impede growth. Things like hiring problems, manufacturing issues, unexpected expenses, cash flow challenges, patent infringements, and so on.
Go back to your SWOT analysis and identify these risks or threats and think about ways you can fix or get around them. These are also good conversations to have with your mentor as well as your accountant and/or lawyer.
5. Failing to Plan for Cash Flow Issues
Cash flow issues are one of the most common reasons why small businesses fail, alongside a lack of demand and poor management. Cash flow issues also stymie growth—52 percent of small business owners say they’d be less optimistic about growth if they experience cash flow issues.
Small businesses are particularly susceptible to cash flow problems—90 percent close their doors for this reason alone. And with growth comes extra cost—inventory must be procured, marketing campaigns executed, new hires paid, and so on. If your outgoings are more than your income, even for a short period, paying your bills gets difficult.
As you plan for growth, create a cash flow forecast and focus on building your business credit so that you can access financing should you need it. Ditch your personal credit card in favor a business one that you can use for large purchases (many offer 0 percent APR introductory offers).
You may want to explore a business line of credit to help fund expansion or tide you over during predictable operating cycles such as on- and off-seasons. Unlike a term loan, which you apply for when you need it and use as soon as it’s approved, you can get set up a line of credit before you need it and only pay for the funds you use. Lines of credit are revolving, and monthly payments don’t kick in until you dip into the cash. Fundbox offers lines of credit to eligible businesses who have been operating for just six months or more with no minimum credit score requirements in order to be considered for credit.
The Bottom Line: Set Goals and Plan
If there’s a common thread to breaking through the barriers to growth, it’s this: set goals and be prepared.
It’s common to think that you need to set business goals for the next five to 10 years. However, it’s hard to reliably predict that far ahead. The business climate and markets change too rapidly.
A more realistic approach is to set shorter-term goals that are specific, achievable, and measurable. For example, rather than saying you want to “grow sales over the next five years”, instead, focus on “attaining 25 percent of market share and increasing sales by 15 percent by the end of the year.”
Your business planning process can help with you set realistic and definable goals. But planning for growth involves more than creating a business plan that you put in front of your bank manager.
To make planning work for your business, you must revisit it as you grow. In that way, it’s less about the plan and more about planning. For tips on doing this read: 2 Easy Ways to Make Business Planning Enjoyable and Productive.