I want to grow my business, what should I do?
Expanding your business or entering a new market needs careful thought
When you're approaching a lender or investor to help finance your business, remember, they need to feel confident that your plans will succeed and that they won't lose their money.
Is the market for your product or service growing?
If your sales have been increasing month on month and year on year, there's clearly a growing demand for your product or service. However, although you may be enjoying the rise in revenue at moment, sales could flatten out if your market becomes saturated. This could happen if you have a limited number of customers or if a new rival starts up.
So, as you plot your company's future, it's important to look carefully at your current market in terms of your available customer base and your competitors. Once you've done that, you can begin to build your plan for sustainable growth. If your market is limited, think about how you can overcome this and include it in the plan.
Do you know how you're going to grow your businesses?
There are four ways to improve revenue:
- Sell more of your current product or service to your existing customers
- Sell your current product into a new market, eg into a new city or through the internet
- Develop or buy in new products to sell to your existing customer base
- Develop or buy in new products to sell to a new market
These strategies can be mixed and matched according to the circumstances of your business. However, considering each one in turn will help you understand what opportunities exist.
It's important to think about the risks as well as the opportunities. Selling more of your existing products to existing customers is relatively low risk in terms of investment but if the market becomes saturated, your returns may be too low. Meanwhile, developing new products and selling to a fresh customer base is very risky, as it involves two major unknowns. It will also be expensive in terms of the development and marketing costs. These need to be calculated and the risks assessed.
As you're developing your plan, it can be a valuable exercise to talk to your bank. They can help with advice on your business plan , Loans and other available finance options, including grants and schemes.
As well as growing organically using your internal resources, you can also expand by buying a competitor or another company that will extend your current product range and so ramp up your share of the market. Known as 'acquisition', this will generally require more business funding. What's more, they are not always pre-planned – often they come about when an opportunity arises unexpectedly. Whatever the circumstances, talk through financing options with your bank. A Barclays Barclays Business Manager will happily talk you through this – you don't need to be an existing customer.
Have you drawn up plans and set objectives to support your growth?
Whether you need additional business finance to smooth out cash flow over the next few months or a substantial business loan or investment to fund an expansion into a new market, the business plan you put together should present a credible strategy. It should contain:
- Details of your product
- Description and analysis of the market or markets that you plan to sell into
- A sales plan
- A marketing plan
Include sales projections - these are key. If your focus is your current market, and you've been in business for a while, combine your historical sales figures (including trends) with wider market information. In the case of a new market, draw on third-party research on its size, growth trends and opportunities.
Are you sure your growth strategy will make your business more profitable?
Increasing your number of customers may well increase sales but if the cost of getting those customers is too high, your overall profits may fall.
Equally, increasing the number of products you sell may boost sales, but if it also means that a large amount of stock is left unsold, then once again your profits could dip. So make sure you have assessed the profit potential of your growth strategy, and include it in your business plan.
Do you know how much money you need to meet your objectives in total?
Businesses often underestimate the amount of cash that will be needed to break into a new market, launch a product or even take on board a major supply contract. Cost everything and forecast cash flow as far ahead as possible. See Keep on top of your cashflow
Lenders and investors are an important source of business finance to fund your plans to take your business forward. However, to access this cash, you will need to spend time and energy creating a workable and viable plan, showing that you clearly understand how much you need and what it will be used for.