There comes a stage in the lifecycle of every small business where they need to take the next step in order to grow. That ‘next step’ can take many forms – recruiting more staff, finding an additional location or increasing production.

Growth is something that most SMEs need to achieve their goals. It is also a significant marker of success for any company; so, it is no wonder that many entrepreneurs and owners are keen to scale their business.

However, growth requires having the right foundations and undertaking careful planning. We have put together our top seven tips for preparing to grow your small business, so you know how to do it effectively. 

• Have a solid business plan
• Know the funding options
• Track your accounts
• Monitor competitors
• Utilise local and industry funding
• Do what you do well
• Understand the risks

1. Have a solid business plan, including goals

Every enterprise needs a well thought-out plan behind it to make sure that your processes and strategies work effectively and in line with your original business idea. Part of this plan should include your future vision for the company.

When outlining this future vision, you should determine what the short and long-term goals are for your company. By setting these goals, you can create a path for your business growth. Furthermore, you can reflect on the rest of your plan to make sure these goals align with your USPs, target markets and products/services.

Having your growth goals documented in a plan will allow you to continually refer back to identify when your business is ready to take the next step and what that next step should be. It will also ensure that any growth moves you make are right for your enterprise.

2. Knowing the funding options and how they work

While attention is often placed on how loans can assist your firm in times of strain, they can be key in allowing your SME to achieve the growth you desire. It is therefore vital to understand what funding options are available and how you can utilise them.

Many forms of finance can fall under the ‘growth’ umbrella: angel investment, P2P lending, invoice discounting and crowdfunding, among others. All can help you to obtain sizeable sums of money to fund growth.

Angel investment is when individuals with a high net-worth invest their wealth into your company in exchange for equity shares. In some cases, they will be familiar with your industry so they can offer valuable guidance too. If you can find the right angel investor for your enterprise, this is an ideal solution to achieve investment and guidance to achieve your goals.

Peer to peer (P2P) lending works similarly to angel investment, in that small investors and larger commercial funds put their worth together to invest in your SME. It cuts out the middle-man role, which would usually be taken by a bank, by utilising online platforms to bring lenders and borrowers together. This means better interest rates can be enjoyed by both sides, which gives it an added benefit as a growth finance tool, it does typically come with higher costs.

Crowdfunding is an alternative way of raising finance to grow your business. You can use online platforms to draw a ‘crowd’ of investors (usually members of the public who won’t be familiar with investment) who pool together small sums to place into your company. Some enterprises have seen massive success in crowdfunding, but it won’t be suitable for all businesses. As such, it’s essential to make sure you use it right.

Another option is invoice discounting. Invoice discounting is when a lender funds up to 90% of any invoices owed to you by your customers. This allows you to release working capital into your business will still being able to provide your services to customers, without having to await payment from them. You can also maintain a degree of confidentiality, as you will not have to disclose to your customers that you are using a lender. However, you should make sure your customers are able to pay you within the lender’s terms, as you may otherwise be left having to make the repayments yourself.

On a smaller scale, alternative solutions such as cashflow management finance will enable you to increase working capital in your operations to then invest in growth elsewhere.

By taking stock of the different funding options, you can craft a financial plan for your growth, which will make the process smooth and feasible.

3. Utilise local and industry funding

Another good source of funding for small enterprises wishing to grow is local or industry-specific grants or loans. Grants are especially beneficial as they do not need to be repaid and can span the range of research and development to capital equipment grants.

In order to be accepted for these sources of funding, your business will need to meet set criteria. This usually involves providing value to your community or industry in some way. So, if you are aiming to grow, it is worth considering how your business will be able to provide this value.

Research local authorities, growth hubs or industry bodies to find any loans, grants or financial awards they offer that could be related to your operations. The government also has a finance search tool that can help to identify these.

If there are loans or grants available that coincide with your business offering or growth plan, take advantage by applying. In some cases, these loans may be quite sizeable, which will be an excellent boost for your growth funding.

4. Track your management accounts

When you are taking steps towards growth, you need to make sure your SME is in the right position financially. The evidence for this will lie in your management accounts.

Your company accounts should be checked regularly to keep tabs on how your business is performing. As you do this over time, you will be able to identify emerging patterns, such as increased profit, rising sales or increasing costs. If you see these patterns, it could be a sign of better demand, which suggests your company is ready to grow.

Equally, if your accounts indicate your company is not in a stable condition, it might be a sign you should focus on improving your current position rather than seeking expansion.

Essentially, your accounts will prove if you have the financials in place ahead of you committing to growth, which will boost your chances of success and eliminate the risk of your company overstretching itself.

5. Monitor competitors

When considering expanding your enterprise, it is worth taking stock of your competitors. There are two ways this can help.

Firstly, if you know competitors that achieved similar growth to that you want to achieve, you can reflect on their activity and how they have done it. Use this to shape your own plans and establish how you can grow. If your competitors have tried to expand and it hasn’t gone well, learn from their lessons and consider how you could tackle the challenge in another way.

Secondly, competitor research will unearth gaps in the market or ways you can better the existing offering. Finding these gaps can give you a basis for growth – to provide new value to customers who cannot get it elsewhere – and also ensure there is a demand for the new products/services you hope to deliver.

With this in mind, checking out the competition is a reliable indicator of what growth works or is needed in your sector, which will shape your plans.

6. Do what you do well

There is no point to growing your business if you haven’t already got a handle on the state of your current operations. So, it is crucial to make sure you are in a good position before you consider expanding.

As well as checking your financial stability via your accounts, ask questions about the efficiency of processes and capacity of your business for growth. This could include whether your customers are satisfied, your operations run smoothly and whether your company has a good share of the existing market. If you feel there is room for improvement, take the actions to do this before you take the next step. There may be the needs for further investment in equipment, systems or people to fuel growth.

Once you feel you have mastered your business in its current form, it may be a good indicator that you are ready to grow – the only way is up!

7. Understand the risks

If you have determined your business is ready, you can make the moves towards growth. However, when doing so, you should understand the risks involved.

Growing your business usually means taking on increased costs – whether it be new staff, additional supplies or investment in new assets. For many, spending this money will be the key to unlocking new profit. However, if not done correctly or if the demand isn’t there, this could put your business at risk of increased losses and even debt.

To eliminate these risks, you should have a carefully considered plan for your growth that is financially sound and feasible for your company. Following the tips in this blog will help you to do this.

By creating and keeping to this plan, you can ensure your business stays on track and moves from strength to strength as you grow.
Get advice

Growing a small business is equally exciting and challenging for owners, mainly as doing so will allow you to realise your company goals. However, the key to success is having the right support, finance and planning in place.

If you need assistance in achieving growth for your SME, we can help. Our team of experts have experience with businesses of different sizes across industries, so we understand what it takes to achieve expansion success.

Read about the growth finance services we offer or get in touch today.