The average small business takes two to three years to reach profitability, but the actual amount of time it takes depends largely on a business’s startup expenses, employee salaries, and capital. And while businesses must remain profitable in order to exist, business growth is also vital to long-term success and survival.
If you’re ready to take your small business to the next level, there are several things you’ll need to consider as you prepare to expand. Check out these recommendations from the SmartBiz team to learn all about the different things you’ll need to take into account when growing a small business!
Growing a business takes time and money, which is why you’ll need to conduct a thorough financial analysis to help you determine whether expanding is the right move for you. According to the Houston Chronicle, it’s important to consider the following financial factors when determining whether to expand:
- The business's sales and revenue projections
- The cost of expanding the business, taking into account any long- and- short-term expenses such as new equipment, marketing campaigns, and staff recruitment
- Increased operating expenses, including overhead and production costs
- Cash and credit needs
- The business's estimated return on investment (ROI)
After conducting a financial analysis, you’ll have a better idea as to whether expanding your business is the right move for you. In some cases, the cost of expanding the business may exceed the projected increase in sales and revenue.
2. Legal Structure
In addition to considering the financial aspects of growing a small business, you’ll need to determine whether to upgrade your business’s legal structure when expanding. If you currently operate as a sole proprietorship, for instance, it may be time to upgrade your business structure to a corporation or limited liability company (LLC). There are several similarities and differences between LLCs and corporations, but the business formation process is typically simpler for LLCs. Additionally, LLCs offer tax advantages, protection from personal liability, and greater flexibility in the distribution of business profits.
If you’re ready to upgrade your legal structure to an LLC, online business formation services can help you to do it with ease. You’ll save money on costly lawyer’s fees, while also ensuring that you’re meeting the rules and guidelines for forming an LLC in your state of residence. If you’d prefer to structure your business as a corporation or partnership, however, the Small Business Administration (SBA) offers some tips on how to do it.
3. Business Security
According to Chris Porteous of Business.com, several digital and physical security measures are crucial to growing a business and protecting it from harmful criminal activity. If criminals attack your business and steal money or sensitive information from you, you may struggle to remain profitable, retain customers, or stay afloat altogether. As such, business security is crucial to the growth and long-term profitability of your company.
Whether you’ll be expanding to new locations or working from home while growing your small business, there are some steps you can take to mitigate your risk of burglaries, security threats, and cyber attacks. These include:
- Online security measures. To protect your customers, workers, profits, and reputation from various types of cyber crime (such as identity fraud, theft, and ransomware), it’s important to keep anti-virus software updated, use strong passwords, back up business files, and talk to employees about the importance of data security. Verizon’s tips and tutorials can help you to get started.
- Physical security measures. If your business operates out of a physical office location, it’s a good idea to secure the building with cameras, alarm systems, and industrial-strength locks.
The Bottom Line
Knowing when it’s time to expand a small business isn’t always clear, and there are several things you’ll need to consider before you can officially start planning for growth. However, these three tips will help you to determine whether an expansion is the right move for you and the future of your small business.