We have all heard the phrase, “It takes money to make money.” In the small business realm, this is the truth. Expansion can be a costly thing. Gaining new talent, retaining old talent, expanding your supply chain, and diversifying your product offerings can all be a part of growth and expansion. But each one of those things will also cost money. And as any small business person knows, there is no such thing as “extra” money.
Today, we will examine six tips to help you on your expansion journey. Get ready because, after this article, your business will be ready to ignite!
Make Sure Expansion is Warranted
Tip #1 - time for a gut check. Expansion can be fun. It can be exciting and rewarding. However, before you take any leaps, it is always best to step back and ask yourself a few questions first.Some key questions to ask are:
- Is this just a spike (seasonal, economic, or otherwise) that will pass?
- Or will this demand continue long term?
- Are there inefficiencies that could be addressed to provide the needed workforce or resources?
In business, sometimes we get so caught up in the “how” question that we forget to ask the most critical question - is this something I need to be doing in the first place? So, take some time to take inventory, ask the hard questions, and see if expansion is the right move.
Forecast the Cost of Expansion
Life would be a lot easier if we had a working crystal ball. However, the sad fact is that we cannot investigate the future and say for sure what will happen. However, we should still give it a try!When you have done your gut check and ensured that expansion is indeed warranted, it is time to count the expansion cost. Surround yourself with your team members and listen to what they say. Chances are they will be able to see things you can’t, which could save you considerable time in the long run.
Look at expansion from every angle. Examine every possibility of risk and reward, cost and benefit. Write it out. Understand that good ideas often have unintended consequences. What might those be in this scenario?
Once you have gathered as much information as possible, create a forecast of what you think it will cost, then tack on an extra 10% because, let’s face it, it always costs more than you think.
Shore Up Your Business and Personal Credit
- Getting a loan can be challenging. Getting a loan at a decent rate can be even more difficult.
- Gaining and maintaining good credit is vital to ensuring that your business can access the funds it needs to grow.
On the business side, having a legitimate, incorporated business is vital. Create business checking and savings accounts, and maintain proper balances. Create business lines of credit through local stores. Make sure to watch your credit scores for inaccuracies or fraud. The largest business credit reporting agency is called Dun & Bradstreet. Creating a DUNs number will allow you to set up a profile with them, which will likely be something lenders look for anyway.
On the personal side, the best way to build good credit is by having a good mix of credit cards that you pay on time, every time, while never utilizing more than 30% of your total available credit.
Having good credit will go a long way in helping you finance your small business expansion.
Bank Loans
Now that we have taken all the initial steps, it is time to look at obtaining info on small business loans to get the money you need to grow your business. Bank loans are, of course, the first stop.Loans from banks are how lending has been done for years and years. And there is a reason. Because of competition within the industry, financial institutions offer various options and are constantly trying to get your business. Make them work for it, negotiate, and shop around for your absolute best option.
But if a traditional bank loan fits your style better.
Crowdfunding
Few revolutions in the small business financing arena have as profound an effect as that of crowdfunding. You do not have to worry about getting approved, mountains of paperwork, or high-interest payments through crowdfunding. Instead, you must be a very good marketer with a good product or service that meets people’s needs and provides a solution to their problems.- A piece of cake, right?
- While crowdfunding provides tremendous opportunities when you are trying to expand your business, it is only for some.
Alternative Small Business Lenders
Merchant cash advances, unsecured business loans, peer-to-peer lending, working capital financing, short-term funding, a business line of credit…Today, there are more options than ever to fund your business expansion. Alternative funding methods can carry more risk with them. However, if you are willing to do your due diligence and research it out, you have a great opportunity that can open the door to the funding that you need.
