Business 101: Three signs that it’s the right time to expand your small business
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THE contribution South African small businesses make to GDP has continued to increase by at least 12 percent year on year, since 2013.
The consistent upward trajectory means the number of small businesses is increasing and some are expanding, albeit many are impacted by the Covid19 pandemic.
In recent columns, we spoke about the importance of a business plan and planning for growth, but for many small businesses, growth is a daunting prospect, and for good reason. Business advisers often warn against expanding too soon, given the risks involved.
Expanding too soon could lead to an overwhelming degree of complexity, exorbitant debt, cash flow issues and reduced profitability.
Knowing when to expand does not come down to a formula – a large component of seizing opportunity at the right time comes down to intuition and, perhaps, 5 percent good luck, but there are signs to look out for.
Consider three signs when deciding whether your business is ready to expand:
1. There is a noticeable skills gap
To a degree, small business owners, especially those who bootstrap their ventures, need to wear many hats and have a role in every aspect of the business.
There are business owners who fill the role of strategist, social media manager, administrator, finance manager – the list goes on. But, often, there comes a point where the skills of one or a few people cannot bridge the gap between the demand for a particular product or service and the skills needed to produce or refine the offering.
2. Your industry is growing
Just a decade ago, blockchain technology companies did not exist. In contrast, entire industries like analogue photography development, have become obsolete in a relatively short space of time.
This is why it’s important to take the guesswork out of doing business and base your decisions on the facts and figures. Market research is not something that should be relegated to start-up stage – it needs to be constant and consistent. Staying ahead of industry trends, will help small business make informed forecasts about the future of their business.
In a world that is changing at an unprecedented rate, it’s the small business owners who keep an ear to the ground and are therefore able to expand by being proactive rather than reactive.
If your industry is expanding, become a frontrunner in driving that momentum forward. If your industry is not growing, it may not be the end of the line – find ways to incorporate new revenue streams by branching out with your product or service offering.
3. You or your team have become complacent
In an economic environment such as ours, where most small businesses fail within their first few years, it is prudent for small business owners to pour time and resources into making a success of those formative years.
“What’s next?” is a question small business owners fail to ask themselves and their teams. The danger of not having a growth plan in place from the onset is that it leaves space for complacency to creep in. Complacency is the enemy of progress, and in the context of the business world, where innovation is non- negotiable, complacency poses a very real threat to growth.
When a small business is thriving, its cash flow is looking healthy and it has established a loyal customer base, it’s easy to become comfortable and assume the good times will continue.
Ben Bierman is a managing director at Business Partners Limited.
*The views expressed here are not necessarily those of IOL or of title sites.
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