This article was reprinted with permission from NerdWallet.
Your small business' growth is a natural part of life. Abraham Twerski, a psychiatrist and rabbi, explains that the stimulus for a lobster to grow is its discomfort. He also demonstrates how stress can help to propel positive change.
Contrary to popular belief growth does not always require more wealth, larger offices, or more employees. It is a good idea to think about what growth means for your small business, and what it will take in order to achieve it.
These are some questions that will help you make the right decisions for your small business.
1. What is success?
Paul Jarvis, co-founder of Fathom Analytics and author of Company of One, has been working for himself for more than 20 years. He doesn't want to expand his company in the traditional sense of that word. He says that it can be very beneficial but not always. It is not always beneficial, he says.
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Jarvis works at Fathom to improve the skills he is truly interested in, like video editing. Although Jarvis would like to learn more about how to become a manager so that the company can hire more people, this is not his goal. He believes that success is about creating the life he desires while still maintaining his business' resilience.
2. 2. What are your motivations to grow?
While money is important, it should not be the only motivation for growing a small business. The driving force must align with a higher purpose. Score mentor Hugh MacMaster explains that businesses arise from the demand for a specific product or service. He says that there is a need for a product or service that has not been met and that you can fill it. If the focus is on making more money, it won't be focused on satisfying customers unmet needs. This is not a good idea.
Related: How to Get Grants for Your Small Business
3. Are you looking to manage more employees?
Being your boss is one thing, but being the boss of others is quite another. Jarvis discovered that he does not want to be the boss of others because it isn't something he enjoys. It is time-consuming and costly to manage human resources, run payroll, create workflows, manage employee benefits, and integrate that information with your accounting. Small-business payroll software and HR software are great options for those who have the technical skills and the financial means to pay the extra monthly fee.
4. 4. Will your relationship change with current clients?
The success of a small business is determined by its patrons. If growth means alienating customers or sacrificing quality in exchange for quantity, it could be detrimental to the business's long-term success. Diana Martinez, mentor at Score, and CEO of Blukastor (a marketplace for Latino small business services), says that it is important to understand your capabilities and make an assessment. She suggests that you ask your most loyal customers for feedback about any major changes.
5. What is your business' profitability?
It is important to understand the numbers behind your business, regardless of whether you are looking to grow. Martinez stresses the importance of setting key performance indicators (or KPIs) so businesses can measure success, and set concrete goals. Jarvis also warns against basing success solely on gross revenue. He recommends paying attention to margins. Jarvis says that if you have to spend $10,000 to make $500,000 but need to spend $900,000. to make $1,000,000, you are going in the wrong direction.
Small businesses can also compare their financial ratios to industry benchmarks established by the Risk Management Association. RMA compiles reports from small- and medium-sized clients of its member institutions. Banks refer to these reports when assessing loan applications. You can compare your business to determine if you are eligible for a small-business loan.
6. Is the work in line with your mission?
Jarvis takes a few hours each day to reflect on his company's progress and take a break from the daily grind. He says that if you aren't doing the work, then you're just in it. He suggests that you create a weekly event on your calendar, even if it is only for 20 minutes, if time is not an option.
Check out these three benefits of hiring teenagers for your small business in the labor market
While expanding your small business may not be a good idea or a bad thing, it must align with your goals as a founder and individual. Martinez emphasizes the importance of learning your leadership and time management skills during this process. Empower yourself, because what you do for yourself will reflect on your team.
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Hillary Crawford writes for NerdWallet. Email: hcrawford@nerdwallet.com.
