the challenge of growth in business five critical tasks

While market research can show ways to improve existing products, it can also identify new products and find new business opportunities.. Market research 2 Market research is another key

The challenge of growth in business: five critical tasks

Table of contents

Introduction 5

Financing 11

Conclusion 16

Although the current economy is still struggling, it does not preclude an

opportunity for you to grow your business In fact, it may serve as a defining moment for business-savvy managers and entrepreneurs to build strategies that will best serve today’s complex environment and help drive the nation’s economic recovery This white paper discusses five critical tasks for managing growth and includes ways to free up capital to finance your expansion plans

The five critical tasks for managing growth are:

Consider all available options for expansion.

Conduct thorough market research.

Develop a sound business plan.

Secure the best available financing.

Make the most of current technology and software.

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Once you have decided you want to grow your business, you have a multitude of avenues to consider Much depends on your type of business,

as well as what resources are available to you.

An obvious option for growth (and probably the most common one) is to open an identical business at another location If your current business is doing well, you may be able to tap into a new customer base, and you already have the experience to run the business successfully You could even consider a location in another country, although this would require a great deal of research, knowledge, and expertise (It might be simpler just to sell

to a foreign market by finding a foreign distributor for your product.) Thinking outside the box, you might also consider partnering with a related business There is such a partnership in a coastal community called “Worms and Coffee,” where local fishermen can purchase bait and coffee at the same location While that may seem a bit extreme, we all know of the trend a while back where a coffee shop would rent space inside a bookstore Complementary products increase sales for both businesses by bringing in new customers

Another tactic is diversification Diversification both attracts new customers and allows you to sell more products to your current customer base When you have earned a good reputation in the marketplace, you have also created a degree of trust from your clientele that can translate into the sale of other products The principal advantages of diversification are the lessening of risk and the opportunity for increased profit Risk is minimized when

Options for expansion

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the rise and fall of sales becomes more level throughout the

year by selling additional products or services with a more

varied or different demand cycle (for example, selling both

water skis and snow skis) If you are a manufacturing

company, production facilities can often be utilized at a more

optimal level Personnel can be cross-trained and greater

efficiencies can be achieved There is also the potential for

cost savings through shared resources among diversified

products, as well as increased sales through the potential

bundling of products and services

One of the more popular techniques today for expanding a

business is to increase your company’s presence online Internet

sales and social media can enable you to reach customers you

might otherwise not have the chance to sell to and have proven

to be quite cost effective Not only does it simplify reaching

potential customers in different geographical areas, but it is also

an extremely cost-effective marketing tool A website enables

you to stay in touch with your current customers, find new

customers, and, with the addition of a “Frequently Asked

Questions” section, may even reduce your customer support

time This is an area where it is usually best to have an outside

consultant do the design work Whether you are creating a

website for the first time or if you simply need to improve an

existing site, an experienced consultant may allow you to make

considerable inroads into untapped markets for your business

Diversification both attracts new customers and allows you to sell more products to your current customer base.

One of the more popular techniques today for expanding a business is to increase your company’s presence online.

Through market research you can gain a better

understanding of your target market, allowing

you to create a plan to reach that market

successfully Before you do anything, you first

need to understand both the needs of your

customers and what the current marketing

trends are Because this is such an important

task and one that requires a great amount of

expertise, you may want to hire an agency that

specializes in market research

Polling your current customers is an often used

technique when performing market research

However, simply talking to customers is not

going to work if you don’t first know the

correct questions to ask in order to gather the information and data you need Even the phrasing of each question can make a notable difference in the quality of the results

While market research can show ways

to improve existing products, it can also identify new products and find new business opportunities There is no point in investing in the development of new products or services

if the demand for them won’t be high enough

to support the cost The budget spent to ensure sufficient demand exists will pay for itself in the end

Market research

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Market research is another key critical task if you are looking to grow your business While market research does take a lot of time and patience, the rewards can make it very worthwhile

Pay close attention to your competition and

learn how to differentiate your company from

theirs Determine what your company’s

strengths are and what you do better than

others in your field Then you can promote

whatever makes your product unique

Market research can also be used to help

develop your marketing plan Having an

effective marketing plan in place is essential to a

successful business expansion You will need a

budget, of course However, remember that any

marketing plan should not be set in stone Keep

an eye on the return on investment (ROI) and

adapt your plan when needed to maximize your

results Conducting thorough research can

greatly minimize the risk of improperly investing

money in the company’s expansion

And, finally, market research can also include a study of whether you have priced your current products correctly Setting a fair price is crucial

to any company’s success

Understanding your product (or service), your market, your customers, your competitors, and your industry will go a long way toward a successful growth plan With good information

at hand, you can reduce the risks by identifying foreseeable problems and also discover new sales opportunities

Developing a business plan is important for both finding investors

as well as keeping your company on track to reach your targeted

rate of growth Of course, any business plan you create should

follow the company’s mission statement The process of

developing a business plan will also assist you in identifying

both the weaknesses and strengths of the company

Describe, in detail, the company’s products and services offered

Include the benefits offered to your company’s customers Give

information about competitors and describe any obstacles that

must be overcome to succeed

Include the information from your market research and what

your market strategy will be Explain the growth potential Be

sure to include any compliance issues with governmental

regulatory requirements and how you plan to meet them

Always include information on the qualifications and experience

of your management team Potential investors want to know

your managers understand the market and your business and

that they have the expertise to successfully manage its growth

Provide past financial statements (usually from three to five years)

and forecast the company’s income for the next five years

While a good business plan is essential to attracting investors,

it also should set the course to follow in the future and help

manage business priorities

Creating a business plan forces you to look objectively at your business and identify any areas of risk.

The process of developing a business plan will also assist you in identifying both the weaknesses and strengths of the company.

Develop a business plan

A business plan is always needed when planning a new business, but it is also just as important when you are thinking about expanding an existing business Creating a business plan forces you to look objectively at your business and identify any areas of risk.

This is where having a well thought-out business plan is invaluable What is the degree of risk for your expansion plans? This will affect your cost and what financing will be available to you Before applying for additional capital, you’ll need to know your specific needs Remember the strength of your management team is important to anyone who is considering investing in the company

Some businesses will approach business acquaintances or even family or friends for the needed funding Sometimes the investor will ask for an equity stake in return, and then you have to decide

if you are willing to give up some amount of independence However, if this does occur, you could include a contract clause allowing you to buy back their stake at some future time

Financing

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While it is true our economy is struggling at the moment, there are still lenders who are willing to invest if you know where to look Just realize that the lending criteria are a lot stricter in today’s market.

“Angel investors” are individuals who are looking for a higher rate

of return than a traditional

investment.

You can also look for state and federally

funded loans and grants that may be available

depending on the type of business There may

be special criteria to qualify, but if you don’t at

least look into this, you could miss out There

is a wide range of different types of government

grants: everything from providing funds to

encourage technological innovation in the

private sector to funding businesses that

create products and services that improve the

environment and human-health conditions in

urban areas

You might also consider looking for business

angel investors “Angel investors” are individuals

who are looking for a higher rate of return than a

traditional investment They often have business

experience and may want some type of active

role in the company’s management in exchange

for their financing

Another possibility is to seek funds from your

company’s employees Many companies use

an Employee Stock Ownership Plan (ESOP)

as a source of equity financing and as a

motivator Not only do employees then have a

stake in the business’s success, but such an

investment protects their current employment

as well

Some companies have used factoring, as it can provide funding quickly The factor purchases the company’s accounts receivable at a discount and thereby gives the company an immediate cash infusion

Securing capital for business growth in a struggling economy can be a challenging, stressful, and lengthy process It is essential

to explore all possible options available to you The annual report published by Pepperdine University1 reveals that 59% of small business owners surveyed found it difficult to raise new financing and only 33% of those who applied for bank loans were successful But being difficult to obtain does not mean impossible and there are alternatives to bank financing In any case, in order for financing to be secured, investors must believe the business has the potential for significant growth And, of course, once financing is located, make sure it is both sufficient to see you through the initial expansion period and has some cushion built into it

The advantages of applying today’s technology

are several, but what comes to mind first is

improved efficiency It’s simple: Time is money

Having the correct information available to you

at all times is often the key to a successful

business, and technology can do much of the

necessary work for you It can collect,

process, store, and report on essential data to

help a business run smoothly Increasing the

speed that information can be shared with

both employees and customers results in

faster and improved customer service,

promoting business growth and success

There is a wide variety of available software for business information systems For example, there is software for planning, fixed assets management, inventory tracking, sales tracking, and purchasing and ordering systems

Having the correct software in place can give you the important tools needed to increase productivity, decrease processing time and cost, increase you share of the market, and help to reduce risk Less human involvement often means lowering the risk of error Plus, software never takes a day off, never gets ill, and is willing to work for you 24/7

Making the most of current

technology and software

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Making the most of current technology can mean all the difference between the successful growth of your business and a failed attempt

Cloud computing is a great strategy to expand

your business operation It allows for greater

mobility and ease of access, which older

systems did not address One of the greatest

advantage of cloud computing is that it allows

businesses to grow independently of their

various locations or distance between offices

And think of the cost savings when you migrate

to the cloud: you no longer need to spend time

on updating, adding servers, installing antivirus

software, or making backups Furthermore, you

can be sure you will always have the very latest

software available without any of the trouble of

installing it

Yet another strategy for growing your business

by using new technology is to make the most of

comfortable with buying online and the benefits

of the additional exposure for your business are endless Internet sales save both time and money, with seemingly endless potential

An investment in technology can keep your business growing Do not overlook the fact that technology, while needing an initial outlay

of capital, can, in the long run, reduce costs and increase profitability It can also optimize productivity and reduce risks, all of which adds to increased business growth Of course, the world of technology is always changing, so it is vital to keep both hardware and software up to date

Freeing up capital

You will usually need additional capital to fund the growth of your business However, before you look for financing (or as a supplement to it), you should take a good hard look at your operation and see if there aren’t some overlooked ways of saving money here and now

One approach to free up capital is to outsource certain jobs There are many facets of the workplace that can be outsourced successfully, such as communications, payroll, and bookkeeping

By doing so, you are able to take advantage of businesses that specialize in particular areas Outsourcing may allow you to complete certain tasks quicker and with less investment in personnel Therefore, outsourcing can cut costs and raise profits Another idea is to install appropriate software that will help you

to improve efficiency and thereby free up both staff and funding

to support your expansion plans Fixed assets management is just such an area that, in many companies, can benefit from some improvement

Here’s an example: There are still companies today that are using spreadsheets to manage their fixed assets This is a costly practice for many reasons To begin with, the number of man hours spent in updating the fixed assets spreadsheets, plus the time spent researching any changes to the tax regulations and GAAP rules, can be overwhelming