Growth Strategies for Small Businesses

Today's small businesses operate in a vibrant economic landscape that is increasingly rooting for their success. Unlike a few years ago, when failures and struggles were looked upon as taboo, small businesses have shed their fears and look at such experiences as a learning experience. The young entrepreneurs who drive these businesses are more willing to take risks. They also have better access to small business financing options which allows them to get off the floor, test things, and go to market quickly with better preparation.

However, it isn't all rainbows and sunshine for small businesses. Recruitment, for example, is one of the biggest challenges. Small businesses need the right talent and experience to grow which often comes at a steep price. Many small businesses come up with innovative ideas to disrupt the market and an idea may require time, patience to reach sufficient traction. The biggest requirement of all, continues to be capital, and small businesses need to choose from a variety of SME Finance options and pick the ones most suitable to their operating environment.

Small businesses tend to start by raising debt capital from friends and family. Once they see proof of concept, they look forward to business loans or investors for further funding needs. With growing opportunities business loan interest rate have become affordable and the hassle-free processes encourage many to try SME Finance options. Many small businesses also try to self-fund or bootstrap until a viable funding source comes their way.

Also Read: What Does Capital Mean In Business? 

If you are a small business owner, then you must keep in mind the success factors listed below:

1. Unique Value Proposition: Small businesses are often in the David v/s Goliath game. Large enterprises have the resources and money to do everything better. They also have the power to set up a more talented team and more patience capital at their disposal. So what gives the Davids of the world an edge? It is their unique value proposition. Often, it comes in the form of a differentiated technology or a viral edge that has resulted in quick customer acquisition. Or it is the business as a whole that is changing conventions and improving a product or service exponentially. We moved from Yellow Pages to Google search, it didn't improve our experience by 20% but by 200%. A disruption like this is the unique value proposition that small businesses should try to create.

1. Your Customer's Characteristics: Small businesses thrive on doing something different. To that effect, they are very focused on their existing and potential customers, their behaviours, likes, dislikes, purchase patterns, demographics and more. These details allow them to engage better with customers during the customer lifecycle.

1. Focus On Key Revenue Streams: This may be an advantage or disadvantage as you choose to see it. Small businesses have limited resources and hence they only have the ability to focus and go after their most important revenue streams. This allows them to be very precise in their outlook to keep their business alive and kicking until help arrives in the form of external funding.

1. Competition Benchmarking: Small businesses have a very keen eye on their competitors. At that stage, things are so flexible that it can be anybody's game and the timely introduction of a new feature can mean the difference between profit or loss.

1. Focus on Strengths, Minimize Weaknesses: Small businesses usually face common challenges, however, learning from others and playing up their strengths is what keeps a small business going. Mostly, such businesses have one core strength that they refuse to compromise on. It is this strength that forms the core of the business.

1. Appropriate Talent Management: A small business usually offers a very steep learning curve and employees will have to wear multiple hats, be agile about their responsibilities and grow with the company. One may not get the best pay package in a small business, but will definitely get the experience that'll come handy during their future career opportunities.

Last, but not the least, finance is a big factor that contributes to the growth and success of a small business. Having a financial partner who understands the business and presents simple and easy finance options can fuel growth. Here's how

 

1. Working Capital Finance: It is true that the devil lies in the details. Small businesses often have to cut corners to stay afloat. This means compromising on the quality of everyday operations so that the revenues can be stemmed into priority tasks like customer acquisition. Unless, of course, they secure working capital finance, which can help them streamline operations at an early stage, help set processes, help pay salaries on time and keep employees motivated.

2. Bill Discounting or Invoice Discounting: With such a funding option, small businesses can sell their bill in advance to an intermediary before it is due to be paid. The bill is then presented to the business's customers and the full amount is collected. This works great for small businesses who offer a credit period 30 - 120 days when they sell their goods. This helps businesses get the amount earlier for a small fee or discount. Small businesses often do not have the luxury of sustaining long credit periods but are forced to offer these terms to clients based on the business ticket size. With bill discounting both parties can work together without any capital crunch.

3. Business Loans: Business expansion often entails significant capital investment. For small businesses, these expansions can come at a critical juncture, and they may warrant taking additional risks to test things out. Alternatively, one can also use loans to fund inventory, get a new product line that your customers have been demanding or test out the market with an idea that has potential. A trusted financial partner can help you secure loans quickly and on terms which keep your business' success in mind.

1. Machinery Loan: Small businesses with factory operations must often invest in new machinery and maintenance of existing machinery for smooth functioning. This is the very core of the business and cannot be put off for later. If a sudden cost comes up that the business wasn't prepared for, a machinery loan can ease such situations.

1. Loan Against Property: Apart from friends and family, a Loan Against Property is very popular funding source for small business owners to raise funds. Once the value of the property is evaluated, it is a sure shot way to get the capital you need. It also keeps the business on its heels to return the money to ensure that one retains the property.

1. Venture Capital or Private Equity Investments: While news often does the rounds that venture capitalists are slowing down and taking a cautious approach, you'll always hear that an idea that seems to have potential receives funding. Venture capitalists are known to invest as much in the 'entrepreneur' as the business. It is the combination of the right people in the right business that makes it work.

Also Read: What is Working Capital Management? | Definition & How to Calculate

Grow By Creating Operational Efficiencies

Every business wants to be operationally efficient- deliver the best products and services to their customers in the most cost-effective manner without compromising on revenue, profits, quality of its products, service or support. This balance is something that all businesses strive to achieve and can be a great driver for growth for a business. Here's how,

1. Rationalize Operations:

Rationalizing involves reorganizing and prioritizing operations to increase efficiency. It may mean downsizing, expansion, change in policy, additional responsibilities to existing employees, alteration of a strategy, service or product.

1. Explore Innovative Processes and Technologies:

Where operations cannot, technology can! Technology, these days, is a big part of extending efficiencies for a business. Whether it is green cloud computing or offering flexible work from home options to your employees, tech can streamline costs to a great extent.

1. Maintain Agility and Quick Response Times:

One of the key things that differentiate small businesses from their larger counterparts is their agility. With limited decision makers involved, things can move at a great speed without bureaucratic bottlenecks, being flexible to changes as per customer demands, allows small businesses to steer clear of getting stuck in the rut.

1. Integrate Backwards and/or Forward:

Backward integration involves a purchase of suppliers. It is a popular strategy that allows the improvement of profit margins for small businesses. It also means that you need to have the capital to take on the integration of services, partners, and processes and bring them into the bracket of your operational efficiency.

Some of the top small businesses experienced a growth of 5000%+ in 2017. A few have seen a 23,000% growth! All this has been possible because of a judicious mix of right products, services, strategies, keeping customers in the forefront and good financial partners. So which of these strategies are you going to use?