The School of Hard Knocks: when should you grow your small business?
For many small business owners, it’s the difficult, testing times that provide the hard lessons needed to ensure their dreams are grounded in reality. Nobody likes talking about the failures in your business but these often prove to be the spur for success.
It’s why we’ve launched our autumn series – The School of Hard Knocks – on what we can learn from those tough times and the questions small businesses need to ask themselves to ensure these hard knocks aren’t critical.
Over the coming weeks we’ll hear from those who’ve seen the best and worst of business times and what they’ve learnt from these, but we start with a topic that causes plenty of hard knocks for SMES – growth.
Many owners think about growing their small businesses. It might be that they want a new or bigger challenge, or that their business is getting more work than it can handle, or perhaps they’ve seen a gap in the market that they want to jump into before their competitors. But it’s important that both you and your firm are in the right shape to grow.
Here are a few questions you should ask yourself before deciding whether to expand:
Do you have the ambition to grow your business?
Many people set up their own businesses because they want a particular lifestyle: to pay the mortgage and earn a decent living while having the time to spend with friends and family or pursue other interests. That’s great, but growing your business is likely to threaten that lifestyle.
Also, you need to ask yourself why you want to develop your company. Do you want it to get better or to get bigger? They’re not the same thing. Plenty of successful businesses are quite content to stay the same size.
Are you the right person?
Expanding your business requires different capabilities from you than it did when you set it up. Often, the biggest obstacle to growing a firm is its leader. You need to be a good manager, both of your balance sheet and your growing team. You also need to be a strategist, who can articulate a vision for your business that fires the imaginations of your employees, and to develop a clear business plan to get your business to where you want it to be.
If you really are committed to growing your business then be sure to invest in yourself, as well as your business, to develop the management and leadership skills you need to lead it. You need to grow as a leader along with your company. Also, you don’t want your business to lose its ‘mojo’ as it grows bigger, so you need to work hard to maintain the enthusiasm and protect its qualities that made it unique when you set it up.
Do you have the time and energy?
It requires a lot of passion and commitment to grow your business, so are you in the position right now to dedicate that amount of time or single-minded focus? You may if you’re young and single, but perhaps not if you have a family; however, as your children grow up you may find you have more time to dedicate to growing your business.
Do you have the right people?
You can’t grow a business on your own. A strong team of good, highly-motivated employees who are all pulling in the same direction are the heart of every growing business. But the people who were with you at the start of the business might not be the ones you need to push it forwards. Are you willing to make tough decisions, if necessary, and to invest in hiring the right people to help your firm to get bigger?
Do you have the finances?
For a business to kick on, it needs cash – often lots of it. But you need to be careful, as many high-growth businesses often go bust, because their cash flow can’t keep up with their rapid expansion: they spend money far quicker than they take it in.
So, before you decide to jump-start your business’s growth, you need to put in place robust management systems that will enable you to closely monitor your business’s finances as it expands. Don’t be afraid to hit the brakes if you fear your company’s finances are spiraling out of control.
Do you enjoy it?
It takes a lot of hard work to grow a business. So you need to be clear about your objectives and also ask yourself why you want to run a much larger business. Then you need to put together the right strategy, business model and team to deliver that growth, while keeping your hands firmly on the firm’s financial levers.
Most of all you need to maintain the same level of enthusiasm and commitment you had when you first set it up, because it’s important to enjoy being the boss of a growing business.
At Hiscox, we want to help your small business thrive. Our blog has many articles you may find relevant and useful as your business grows. But these articles aren’t professional advice. So, to find out more on a subject we cover here, please seek professional assistance.