3 things to consider before growing your business.
Everyone wants to grow their business. It’s completely normal to want to grow and to be constantly growing. There’s an endless line of marketing “experts” and “look at me” sales gurus telling us that serving more customers is the only way to grow a business.
The problem is that most of the people telling you to grow have never owned a business themselves and have absolutely no idea what it takes to run a business. Or know the stresses it adds to grow one. It takes lots of planning and analysis to even stay in business and even more if you want it grow.
1. Fix your personnel problems before you take on additional business.
People problems are easily the most stressful and draining part of any business. Varying personalities and emotional turmoil can lead to devastating results in company morale. These stresses are likely to be made worse as more and more work is added to your company’s weekly schedule.
Difficult and argumentative employees who are simply being tolerated for now will only become bigger problems if not addressed. You may consider either re-training these employees or releasing them from your company if they won’t change their behaviors.
Take time to make sure you have the right employees in the right seats. In other words, make sure your office staff are really “wired” to be in an office. Sales people are wired to be salespeople, and so on. There are multiple programs available like Myers-Briggs, D.I.S.C. and others that can help you assess and gain insight into your employees. Holding an ill-appointed salesperson accountable for sales isn’t that far removed from judging a fish on his ability to climb a tree.
2. Make sure your growth is going to increase your bottom line, not just your top line (revenue).
You should be crystal clear of how much money you are making on each dollar you charge your customer. As any business owner knows, some items you make good money on and some items you don’t. Clarify your gross margins or risk growing the part of the business you don’t make money on. Items that aren’t profitable at 100 customers, probably won’t with twice the customers either. You may just be working twice as hard and twice the hours for the same take home pay. Remember, you can’t lose a dollar per widget, but make it up in volume!
If you aren’t sure how to calculate your gross margins, don’t worry, just ask an accountant or a local advisor like Part Time Business Partners. It will be worth it to invest a few weeks to start with the right information, rather than losing your shirt later.
3. Set a realistic goal for your growth so you don’t outgrow your resources.
Perhaps the worst thing you can do to your customers (and your employees) is to say yes to everything in pursuit of unbridled growth. Without proper planning, you may find yourself with dozens of upset customers because you couldn’t handle the increase in demands. This is a scenario that I’ve seen dozens of times with clients and even went through myself a few times before realizing what was happening.
By maximizing your resources (think number of employees, number of available work hours and number of vehicles and tools) you’ll realize what your max output could be. Now, calculating that into revenue (with the right gross margin already in place), you can plan just how much growth you can handle before having to pay overtime. Or hire more people. Or buy new equipment and vehicles. All of which will affect your gross margin as increases in your cost of goods.
When you decide that want to make more money, there’s usually ways to do it without adding more customers. At least not yet. Consider increasing margins by raising your prices on premium services or purchasing better from your vendors. You can also manage overtime and reduce un-billable time.
You can see why these issues should be addressed BEFORE you begin marketing and taking on a swell of new customers to grow your business. Otherwise, you’ll be leaving incalculable profits to the wind and working immensely harder just to keep up. Remember to know what your target for growth is or you’ll likely realize the problem when customers and employees are upset and start leaving. That’s a position that isn’t healthy for anyone.
If you’d like more information on smart ways to grow, get in touch with a Part Time Business Partner today!