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Too much business can be just as bad as not enough.
The Small Business Administration still swears most businesses fail in the first five years. I am still swearing by the idea that this usually a lack of planning. The planning, more than likely, leaves out expansion plans.
Let’s look at a few examples. Anyone remember what it was like trying to use America Online in the mid and late 90? You had to hope you were in an area with quite a few lines. Otherwise, it could take quite awhile to log on. This almost did in AOL for awhile. This was before the days of cable and DSL connections. AOL and other providers didn’t have an inkling as to how to get over this hump.
I have heard rumors that Google is having trouble because its infrastructure is weak. Those hired to carry on all their new structures are struggling to keep up. It’s really surprising nothing akin to this happened to Microsoft in the early years. Bill Gates happened to be talented at getting the work done elsewhere.
Here are ways to help you get a better footing for a growth spurt.
People peck at business plans. Some avoid them all together. While others, just let the subject drop after they get busy. Business plans need to be re-evaluated periodically. Do you see a big increase in sales on the horizon? There was a good commercial a few months about a small furniture company. The accountant comes running in to the room asking the head guy to “Look at these numbers.” The account is overwhelmed, “…if this keeps us; we’ll need…” The head guy’s answer is: “Wasn’t that the idea?” That dear reader sums it up. If that owner hadn’t planned what he was gong to do when his business came to this milestone, he would have been more flabbergasted than the accountant.
I know the part where you are suppose to project numbers into the future. Hard to do before you get there, but you have to do the best you can with what you see happening in the market. The next step is outline what kind of financing you will to need to meet this head on.
The time to go out for financing for expansion is not when the customers are banging on the doors and demanding to know where their orders are. If you plan correctly, sales projections and financing, you will be ready when the time comes.
My definition of being ready is an entrepreneur who finds a way to put funds from his own pocket, relatives and friends, into the business account before he opens the door. He has a business plan open on the computer for scanning at least once a week. He has already proved himself in the business world to the credit folks in general. When time for expansion is at the door, there will be someone ready to hand him a loan.
Infrastructure is also a key issue. Basically, do you have good people that are going to finish the orders coming in the door? If you run a big Internet company and have promised there will be an earth shattering application revealed at the next tech show, did you hire the programmers who will get the job done?
When growth comes, and it’s unexpected, that’s the problem. You will need to know before hand how you will expand your labor pool. If you write this into your business plan, then it will only be a small issue.
When I was starting my own public relations firm, my expanded labor pool included members of a writers’ professional group along with my teenagers. The other writers came in when I needed copy written and research. The kids did mailings. If things had gotten any busier, I would have gone to the nearby college for an intern. If you specialize in an area, it is always helpful to be a member of a group(s) who share the same talent.
Also, be careful that you don’t limit your growth with the structure you give your new business. I had a friend who designed specialized software for small companies. He had to come running whenever there was a problem. The only way to bring in more cash he felt was to offer warranty policies. The only problem was that he would have to hire someone else to take the service calls. He didn’t want to do that. I also heard of a bakery owner who blindly only hired non union drivers. They were only allowed to drive within city limits. He didn’t have a clue that his business was stuck in a rut.
You may also need additional capital equipment if you expand beyond your current equipment’s production capabilities. If you producing widgets, or planning on it, best figure out your peak production capabilities before you get there. That way, you can save for the expense.
If you look back over all the points I made, you will realize that they have one component in common. They all require planning. Good planning is the way to keep growth from doing you in.
For more examples of my work: www.bellbusinessreport.com
Laura Bell
writer@well.com
-30-
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Great post – I remember that dreadful service from aol only too well. You could never get online and when you did, you could clean the bathroom, wash the dishes and still have time to put the kettle on while you waited for a page to load.
Your point about lack of planning is a good one. My last business hit troubles due to fast growth – although we didn’t go bust – but we could have done. The trouble was, our sales increased dramatically, but we weren’t being paid on time. We hadn’t counted on that happening, and we didn’t realise the impact it would have on our cashflow.
And that could definitely been avoided with good planning.
Comment by CatherineL January 10, 2008 @ 12:58 pmA Business Success Is Often the Last Idea Standing
Work in the entrepreneurial arena requires strong, positive thinking. It takes a powerful, optimistic attitude to bulldoze those mountains of negative thoughts and nay-saying advice into the asset column of a new venture. We all love clean, fresh ideas. They inspire and challenge us; but there’s almost nothing as sad as a great, life-changing inspiration deflating like a punctured balloon.
So why do we hold up our ideas to criticism? We do it because there is only one thing sadder than a great idea being shot down. It’s the crisis of a life torn apart from chasing after a poorly conceived and improperly planned venture. As a friend once said about an empty flea market he was trying to sell, “The movie says ‘If you build it they will come’. I built it and nobody came.”
His idea so great no business plan was required. He didn’t need a business plan to sell his family home he had mortgaged to build the flea market either.
Why be negative? Be negative because the negatives are everywhere in the marketplace. We usually refer to them as reality. You can’t ignore them any more than you can ignore gravity when you jump off a bridge. No matter how positive your beliefs you’re going to fall and you’re probably going to get soaked.
Your business plan holds your idea up to all the lights of reality. It figures out what knowledge and how many dollars and how much time it will take to reach your goal.
It not only gives you a path to follow and packages your concept so that strangers can decide to give you money; it tells you if you have the resources and capabilities to pull it off. Most of us want to throw ourselves into new ideas, but often times the honeymoon is short and the consequences of our commitments are long and painful.
There’s an old baseball executives’ adage that says often the best trades are the ones you didn’t make. The same is true in business. The best deal you may ever make might be saying no to an idea that requires unique skills or more money than you can raise. Your business plan can save you that jump off the bridge. Think of the people who rely on you for support. Be smart; be careful.
There is a free report that can answer your questions about funding your venture.
Comment by Tucker Wilson January 11, 2008 @ 5:24 pmContact Richard at 800-440-8775 X 201 to find out more.
I think it really depends on what type of business you are running. Some businesses are harder to manage than others.
Comment by Greg Davidson January 12, 2008 @ 5:08 amI agree that planning is key. A transition plan should be created because most small businesses cannot afford to add all the pieces at once, but they can decide how they will phase them in as they grow.
Comment by Dana Suazo February 26, 2008 @ 8:10 pm