Congratulations, your small business is surviving! Along the way, you've likely hit speed bumps and conquered seemingly insurmountable challenges. Now that your business is surviving — and maybe thriving — the decision you face is whether to expand or maintain the company's current stability.
It's only natural to consider pouring money back into the business, but this is not a time for hasty decisions. Investment managers can help paint a clearer picture, but before you pay good money for a financial consultant consider the endowment effect — the tendency of people who own a good business to value it more than people who do not. This business represents your livelihood and possibly the livelihood of your employees, so it's very important for you to form an objective assessment of your investment's future. Because people fear failure, the psychological impact of a business loss is greater than the impact of an equivalent gain. So, before you pull the trigger on a growth plan, here are some important factors to consider.
Is the timing right and is there demand?
There are a couple of easy ways to assess market demand outside the confines of your current market and customer base. First, try looking at Google Trends, which shows the popularity of search queries related to your business over time. Google Trends also shows you the cities with the highest number of searches for your queries. Consultants and internal employees who help manage your money and investments can always help dive deeper into your data, which is important, but you’ll want to also aggressively survey the surrounding landscape of customer demand.
If your business sells products rather than services, then you might look at online marketplaces to assess how well similar products are selling. Keep track of the number of product reviews over time, and how quickly they grow. These can be solid indications of a ripening market.
And finally, it’s always a good idea to run focus groups, conduct user testing, and give out surveys. There’s always things you can learn from putting the customer first. Many companies are using human-centered design and research to develop new services and products in a way that fixes problems rather than create new ones.
Do you have a reliable process that you can scale?
Repeatable processes reduce variability through measurement and constant correction. There are two main ways to do this. One is to build, test and fix. The other is to take an analytical approach with analysis, modeling, and risk assessments.
In some cases, small businesses require reliability rather than repeatability. In other words, it’s not about mass producing a product or service, rather, making sure whatever product or service is provided is consistent and meets the consumer’s expectations every time in the same way. Take product development, for example, which must adapt to the changing technological landscape. With the proper delegation, the right tools and good feedback channels, small businesses can start to grow without compromising quality, regardless of whether they require reliability or repeatability.
Have you created brand equity?
If you brand is valued, and the consumer perception of what they’ll receive from your band is strong and identifiable, you’ve created brand equity. In studying companies with a high level of performance over many years, Harvard Business Review found more than 80 percent of them had well-defined and easily understood differentiation behind their brand.
To build brand equity, business owners need to regularly connect with the public, inspire and influence the conversations that are important to the brand and ensure that the brand image is regularly reinforced with those closest to it — the employees.
If the timing is right, your process is reliable or repeatable and your brand equity differentiates you from the pack, then you can start looking for opportunities to grow, whether that consists of hiring, operational expansion or developing new relationships with investors or advisors.