Small businesses are the backbone of the Australian economy. There are over two million of them, making up 97 percent of all operating businesses in the country. It's an encouraging statistic and we should all continue to do our bit to support this growth.
However, the narrative that success always equals growth and that growth always brings success is up for debate. Success stories often pivot around a small business's ability to take on more staff or start servicing a global market. But the most common reason for failure is a business' desire to 'grow too fast'. There is something to be said about not growing until you're ready.
Before you take the leap and decide it's time to scale, consider these five questions:
Do you have enough cash flow to grow?
Its one of the biggest traps hindering growth -- a deficit of working capital. Our data shows that one in five invoices payable by ASX 200 companies to small businesses were overdue by more than 30 days. More should be done to protect small business at a legislative level, but as a small business you should take steps to protect yourself.
Ensure you have the right amount of money in your account at exactly the right time for your growth plans. Plan for potential late payments from a client or an unexpected outgoing expense. Consider whether you can afford that growth yourself, or if you will need funding -- and where that will come from.
What's your employment strategy?
Whether you're looking to add more staff to your existing team or recruiting for the first time, it's important to keep in mind financial and legal considerations when growing your business. The existing company culture can be a huge decision maker for someone you want to bring on board. It's something you mustn't forget when hiring new staff. Have a good understanding of the characteristics you want to bring into your team and what type of team culture you want to have. For me personally, I always hire for attitude over experience, and always will.
Will your operations stand up to growth?
Perhaps you have a small online business supplying homemade candles and all your stock is stored comfortably in your garage. What will you do if your business quadruples in size? Does that change if you scale by five times? Can you pack boxes into the lounge room and the kitchen, or will you need external storage? Consider all the logistical levels of each eventuality, such as the price of the storage and the cost required to travel to and from the storage. You may find the planned growth leaves you at a loss and the time to grow isn't right now.
Will your technology scale?
It's much easier to operate and scale a business today with the wide variety of tech at our fingertips. Programs that create efficiencies are now available for a much lower cost. Small businesses today can use bespoke add-in services that can be swapped in and out to address your current business need. Make sure you assess whether your chosen systems can withstand increased orders or altered processes, you might need to start an overhaul. What will that cost you, in time and money, to implement? Investigate the benefits of all available technology, such as cloud technology, to ensure you're best answering your changing circumstances.
Do you have people around you that can help you?
Every business owner has their own strengths and weaknesses and knowing the areas where you need support can be more valuable to your business than understanding your strengths. Working with a mentor can help you to overcome hurdles, strengthen your skills and expand your boundaries. A well-suited mentor ideally advocates for you as much as guides you. But this is a two way street -- respect your mentor by showing up, doing the homework and valuing the precious time they are giving you. It can be the most valuable time you spend on growing your business.
The one answer to all these questions?
Spend time with your figures so you can get to know the big and small picture-details of your business. The history of your financial data will help you unlock current trends, predictions and obstacles that can shape its future.
Once you have considered and answered these questions, you'll have a good basis to have a meaningful conversation with your accountant, bookkeeper or mentor to start planning your next step. Learning to record, analyse and embrace your own data in this way will set you in good stead if you do decide to grow -- because the challenge you don't see is that as your business grows, it's impossible to hold all the information in your head.