How to Expand Your Business with Sound Financial Planning

At some point, all businesses require in-depth look into their finances to evaluate their development and their future expansion options. Anything can prompt an in-depth look in the business financial structure, be it an expansion project, a surge in expenses or even low cash reserves. If you find the business borrowing increasing alongside an increase in sales, you might want to evaluate your financial options as well. Sometimes you may be thinking of enhancing your online efforts for global competitiveness, in which case you need professional merchant advise.

Assessing Business Growth Options

Every business owner knows the importance of consolidating the business financial position to get ways to grow the venture. Should you decide to plan for your growth, you need to plan your finances carefully to ensure succeeding. Growth exposes your business to greater risks, but with a sound strategy, you can be assured of security, stability and long term profits.  Once you assess your own weaknesses, strengths, threats and opportunities to your business, you will be equipped to handle whatever comes your way.

The key to ensuring growth is to build a winning strategy, one that is suited for your business, industry and market growth plans. The growth strategy must critically analyze the financial options that suit your business, the cons and pros of diversifying your interests as well as other considerations that ensure smooth, timely development.

Elements of a Business Growth Strategy

As you focus on the changes that you must implement in order to move forward, the first step is to identify sustainable growth opportunities that you can exploit. Some of the key performance indicators to consider when measuring growth are:

Sales

Profits 

Turnover

Staff number

Market share

The most accurate KPI to measure your growth depends on the industry you are in, the type of business, and the business growth stage. For instance, a retail business may have narrow stock margins but high sales volumes. This reduces the business profits and undermines business profitability. But generally, a combination of profits and sales is a balanced measure of business growth.

Steps To Sound Business Growth

Evaluate Your Current Financial Position

Are you happy with your current performance? It is important to look at your operations; it is very risky to allow competitors room to take away your market share, which will weaken your current position. When preparing for growth, the first step is to consolidate your current markets. An accurate evaluation of your current standing will ensure that your business is well resourced and structured for a viable growth strategy.

Consolidate Existing Performance

Before you embark on your growth plan, it is essential to ensure that your business is efficiently running. While the expansion will take up a lot of resources, it is important to keep the business core functions as profitable. Remember not to neglect your current market share as you put efforts in gaining more and most importantly; make sure your cash flow is sufficient for this growth phase. 

It Is All In the Timing

Timing is critical to the success of a growth strategy. Here are a few questions that will help determine if the right time for expansion is nigh

Are there systems and resources in place to carry on both existing functions and expansion demands?

Is the business working at full capacity and could it cope with the demands of the expansion?

Are the new initiatives likely to affect existing operations?

If so, how will you curb that and ensure that the current market share is maintained?

With expansion comes demand on resources. If you are not adequately resourced, you can outsource some functions such as production process refining, staffing and equipment to give you flexibility to use your own on existing functions.

Options for Growth

There are varied growth options for every business depending on the industry and structure. Some of the main ones include:

Increasing market share

This is the simplest growth option where you attract new customers. This requires a thorough understanding of your target market and those of your rival businesses

Diversification

Although riskier, this is one of the most popular strategies for small businesses wishing to grow. In this growth option, it is important measure up all the costs and risks versus the benefits of the growth plan. Diversification can come as new products, new markets or related products.

Joint ventures/partnerships, investors, mergers and acquisitions

Businesses join forces to create mutual value and share benefit. There are clear advantages of sharing responsibilities even though these arrangements come with shared benefits and decision making responsibilities. Top among the advantages are increased resources such as capital, skills and contacts markets. The arrangements also come with reduced commercial risk.

Financing Your Preferred Growth Strategies

Once you have carefully assessed and chosen your growth option, it is time to think about how to finance it. Think of how much you need, when it is needed and when it will be availed. A detailed cash flow analysis is vital. You can go for 

Equity finance

Venture Capital

Business angels

Strategic partners

Once you have figured out the plan, and you have the resources in place, it is time to embark on your journey to business growth.

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