A Self-Sufficient Dynasty
The growth of a small business, especially in a small community, can be seen as a sort of community economic development exercise. Your small business may be so important to a small community that the local economy depends on it.
Growing your small business can help ensure it survives and grows with the community. A growing business can also help provide jobs for your family members, while building a business dynasty for your family and other families in the area also.
Dominating a Market Niche
Expanding a business can help it become a leader in a market niches. Growth can allow a business to expand into new geographic markets, acquire more customers, or provide the next level of service to existing customers that they’ve been asking for. Growing your brand brings value to the business and quality to customers.
Keeping Good Employees
Workers often want to be part of a growing, successful company. A growing business that provides career challenges can inspire skilled employees and encourage them to stay. Growing businesses offer change and the chance to acquire new knowledge — something younger employees want.
Leads to Other Clients Following
Acquiring a major client can be enough of a need to expand your business, and can get bankers to take you more seriously as your marketplace presence and strength grow.
Economies of Scale
Bigger businesses achieve lower costs per unit and stretch their administrative dollars over a larger product line. By expanding, a business can achieve an economy of scale to contribute more money for research and development, sponsorships, employee training and education, investment in new technology, and creating more productivity out of employees. Expanding a business can allow it to improve, and thus get bigger.
Risks to Consider
Expanding a business doesn’t come without risk. It can take a lot of time and effort to expand a small business, and can lead to stress, less time with your family, and health problems by not eating well or getting regular exercise.
Expansion can also lead to customers feeling under-served, and employees may be uneasy about the changes. Owners may not have the right skills to complete an expansion successfully.
You may also have to convince your lender that you’re ready to expand your business. Before approving a loan, your bank may want you to show how you plan to increase income, improve assets and reduce liabilities.
You Can Do This in a Number of Ways
One way is to take an asset-based approach and add up all asset and personal investments in the business to date, using fair market values for assets.
Another is to explore market value by looking at comparable businesses that have sold recently and estimate your business’ value. Or use an earnings approach and show one or more years of historical or future earnings.
However you plan to grow your small business, start by looking for the signs outlined above to help ensure your business is ready to expand.
