Good Surprises Are Likelier When You Plan for Them
Today's small business owner is bombarded with communication focused on planning for the bad surprises -- plans they need to make, money they need to spend and advisory services they need to hire. To prepare for these unforeseen circumstances, they've likely taken out fire insurance, secured workers comp insurance and hired a lawyer to review their contracts.
In all this, preparation for the good surprises often gets lost. Many times, customers are looking for a partner to help them secure financing and deal with funding needs to fuel their growth -- the best kind of good surprise. The truth is, good growth can be managed and prepared for so that a business owner is able to maximize the opportunity and make smart, thought-out decisions.
From our discussions with hundreds of small business owners, and from our experience seeing what drives a successful outcome, these are some things all business owners should be thinking about so they can become more proactive in managing the good surprises.
Have an informed perspective.
Do a competitive analysis and use other's experiences to inform your expectations of growth. Look at companies in your space that you admire. What did their growth trajectory look like? What kinds of growth funds did they need to move to the next level? Do your homework, and then think about what you envision for your business.
Know how you’ll evaluate opportunities.
We love providing resources to businesses to help them quickly capitalize on emerging opportunities. This is what small business owners are all driving towards. We’ve seen that the most successful customers are the ones who have a clear strategy for evaluating whether to pursue an opportunity. How will you estimate potential revenue? How do you weight the risks? Know the questions you’ll ask before you need to ask them, and you’ll be better prepared when the time comes.
Related: 5 Signs You Have a Sound Strategy
Be smart about your industry.
Growth looks very different if you’re in a B2B market versus operating a storefront that serves customers. What are the trends you’re seeing? How would you capitalize on those -- and at what cost? For B2B, that might be investing in winning a new account, which requires significant cash outflow before any chance of earning income. If you serve customers, perhaps you need to hire seasonal help or ensure you have the right inventory built up for demand.
Look at all ways to grow your business.
The one we most naturally think of is to grow the bottom line by increasing sales. And certainly, that’s a great way to increase profit. But, your plan should also include evaluating your costs regularly. Do you have the right level of employees? Are your machines functioning efficiently? Could you decrease your cost-per-item by buying raw goods in bulk? Many small businesses avoid taking advantage of this half of the equation because they’re worried about the upfront investment. But if a change could quickly result in a positive effect on cash flow, it’s worth exploring.
Understand the lifecycle of your cash flow.
This will vary widely from business to business. If you’re selling a service, are your payment terms 30- 60- or 90-days after you perform? Does your cash flow match the business needs? If not, where are the gaps, and what are your options for closing those gaps?
Haijian Hu is Head of Headway Capital Business Lending, where he helps small businesses take charge of their finances. He previously worked as an enterprise resources planning solution architect helping small-to-medium businesses conquer their financial and operational challenges. Haijian holds BS and MS degrees in Computer Science and a MBA from the University of Chicago Booth School of Business.