Expanding your small business is an excellent way to get one step closer to your long-term goals. A growing company means more customers, higher revenues, and increasing profits.
But is 2020 the right time to expand?
The macroeconomic factors are favorable. The U.S. economy is currently in its most prolonged period of continuous growth since 1854. That should tell you something.
Small business owners should try and make the most of a trend that hasn’t been seen for the last 165 years. Unemployment is at a 50-year low. More people are working and generating demand for goods and services.
According to the Small Business Administration (SBA), there are 30.2 million small businesses in the U.S. They employ almost 60 million people.
So should you plan to expand in 2020? While the outlook is definitely upbeat for entrepreneurs, here are some factors to consider before you make a decision.
At which stage of growth is your company?
Every firm goes through several distinct phases in its lifetime. The initial concerns of an entrepreneur usually are:
- Creating a product or service that people are willing to pay for
- Finding customers and meeting their needs
- Generating enough cash to meet day-to-day expenses
- Competing with other businesses
- Building a reputation for their company
A business that is successful at meeting these challenges can progress to the next phase: growth.
You already have a stable business that is generating a steady stream of revenue and profit. Now you can think about growing your business even further. This could mean buying new equipment or opening up a new location.
If you decide to expand in 2020, there’s one precaution you must take. It’s essential to tie up the funds you would need.
Do you have the money to expand?
If you plan to expand, one of the first things that you must do is to identify ways to fund your business growth. There is a critical factor that you need to consider:
Decide between bank loans and non-bank loans: You could borrow from a traditional source of finance—banks and credit unions provide low-cost loans to entrepreneurs.
However, there could be several disadvantages to borrowing from a bank. These financial institutions are often slow: they could take weeks to process your loan application.
Additionally, they may demand that you put up collateral in the form of property, equipment, or a vehicle. If you are unable to repay the loan, the bank could recover its money by selling the collateral.
Do you have a loyal customer following?
One of the biggest challenges that any business faces is attracting an adequate number of customers.
Getting clients to buy from you can be both difficult and expensive. You have to convince them that you are better than the competition. Additionally, you have to allocate resources to market your product and to attract new customers.
The businesses that succeed are usually good at retaining their customers. Repeat and loyal clients are a badge of honor for your company. Why?
- The fact that a customer returns to buy your product or service, again and again, is proof of your quality.
- According to a Forbes article, it can cost five times more to attract a new customer than to retain one. So repeat customers mean fewer expenses for you.
- Management consultancy Bain & Company points out that a 5% increase in customer retention can result in profits rising by more than 25%. In short: loyal customers translate to more revenue.
It’s no wonder that company owners do as much as they can to maintain their customers.
If you have a loyal customer list that is growing, it could be the right time to expand your business.
Are your sales and profits growing?
Another way to find out whether you’re ready to expand is to check your revenue and net income.
Are they both rising?
If your answer is “yes,” you’re on the right track.
Growing sales and profits indicate several things. One is that there’s a strong demand for your product. Given the opportunity, it’s possible that growth could pick up.
Surging profits is also a positive indicator. It demonstrates your company’s ability to generate a surplus. The extra funds can be plowed back into the business.
Remember that when you expand, you’re going to need additional cash. The profits from your company can be used to pay for your expansion.
Do you have a strong team?
If you’re planning to expand your business in 2020, it’s essential to have well-trained and experienced employees. Unfortunately, with employment rates surging, finding competent workers can be a challenge.
A recent survey, carried out by the National Federation of Independent Business (NFIB), reveals that small business employers can have a hard time finding talented people. Company owners say that in the last two years, it has been more challenging to hire skilled candidates than in the prior two years.
There’s another problem, as well. The buoyant job market results in trained employees looking for better-paying opportunities.
So, if you have a capable team on your side, it can be a significant advantage. When you expand, you could consider giving some of them greater responsibilities or offering them a promotion. This will help your growth plans succeed and also serve as a retention tool for your top workers.
Is there more business than you can handle?
This is another sign that indicates you’re ready to expand.
You’re doing so well that you have to turn business away.
No entrepreneur likes to be in this position. Refusing to meet a customer’s needs could harm your business in several ways. There’s a likelihood that you will lose the client forever. It could also earn your business a bad reputation.
If you can’t handle all the business you get, you should seriously make plans to expand.
It’s time to expand
2020 could be the year to implement your expansion plans. The American economy is growing at a steady pace. Employment is high. This puts money into the hands of consumers.
Consequently, small business owners are likely to see continued demand for their products and services.
If a shortage of funds is holding you back, we can help.
Our motto is “No business left behind.” That’s why our financial products are designed to cater to the broadest possible range of small business borrowers. So even borrowers who don’t have a credit score are eligible to apply.
Even entrepreneurs without a social security number can get a loan from us.
Apply today to find out if you prequalify. Your application will get an immediate response, and it won’t affect your credit score.