Scaling a small business without destroying your profits

Jun 18

Scaling a small business without destroying your profits

It can be a tough life when you’re a small business owner, but you wouldn’t be doing it if you didn’t want to. You had the idea, you did the planning, perhaps with a trusted partner and with some input from financial and legal advisors, and you got your business on the road.

When you’re running a well-planned business venture that becomes successful in its early stages, there will rapidly come a time when you want to scale it. Sometimes you can get taken by surprise because things have taken off more quickly than you anticipated, and sometimes there’s a slower burn as you consider what you need to do to grow your business and how you’re going to fund it.

The right financial planning

Manager Using Tablet Computer In Distribution Warehouse

There’s no point in going all out for expansion if you haven’t thought carefully about your financial planning. Let’s face it, you want to expand because your business is doing well, is profitable and has the potential for further growth. Your financial planning goes hand in hand with what you consider your business requires in the future.

You may, for example, want to buy or lease additional premises, install new machinery or IT systems, employ more people, provide new transportation options and increase your marketing budget. All this costs money, and it’s likely that one of your major concerns is liquidity when you’re considering pumping cash into expansion.

To buy or lease?

Many small businesses don’t have the capital to buy premises, but if your business has done well, then it’s more likely that potential lenders will look more favourably on this option as a result. It gives the business a fixed asset that may, or may not, increase in value, but you will be responsible for repairs and renewals. If you lease premises, you should take care to find out exactly what you’re paying for and match it to the cost of a loan for buying and the associated running costs to see which is the best deal.

Finding the money

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Scaling your business doesn’t have to be prohibitively expensive, but it will cost money. If you don’t want to hit your profits and leave yourself with a potential cash flow problem, with all the implications that might have, you’ll want to look at financing options. If you have a good relationship with your bank, you could try for a loan or a large overdraft. Alternatively, you could look for a business overdraft with a specialist financial company that can make a fast decision about servicing your monetary needs, certainly faster than a bank. You can get flexible credit so that funds are drawn down only when you need them and interest is charged only on what you use of the facility.

Moving forward

Decisions are never easy when you’re growing your business, but then you didn’t opt for the easy life when you decided to become an entrepreneur. If you get your forward planning right and get the access to finance that you need and can afford, one day you could be the next Bill Gates!