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Four Ways To Scale Your Business Responsibly

12/16/2013 01:06 pm ET | Updated Jan 23, 2014
  • Lisa Wirthman

With a third of entrepreneurs making growth a top priority in 2013, small business optimism is a bright spot amid ongoing economic uncertainties. Entrepreneurs’ confidence rose to 86 percent in the third quarter, according to the Ewing Marion Kauffman Foundation.

For sustainable growth, however, that confidence needs to be supported by careful and strategic planning, experts say. Many growing businesses falter because they expand too rapidly, and lack the resources they need to meet growing demands.

Companies can grow responsibly without over-hiring by keeping an eye on trends in their particular industries and communities to understand the most relevant customer traffic, says Tameka Montgomery, Associate Administrator of the Office of Entrepreneurial Development at the U.S. Small Business Administration (SBA). It’s also important to consider long-term impacts of those trends rather than reacting to short-term impulses. “If you can be forward-looking and strategic in your approach, as opposed to just being harried and frenetic, you can have better long-term sustainability,” she says.

Be Consistent

One danger of expanding too fast is inconsistent service delivery. “One factor that makes a small business successful is its ability to provide high quality service to its customers,” Montgomery says. Companies that aren’t prepared for fast growth and can’t consistently deliver quality goods and services will challenge customers’ confidence in their business, she adds.

Richard Lewis, Founder and CEO of Denver-based RTL Networks, Inc., has turned down contracts that his technology and energy solutions business couldn’t successfully fulfill. “I’ve never shied away from growing too fast, but I’m always aware of the limitations of our delivery infrastructure,” he says.
“We don’t want to be in a situation where we win a contract and can’t get everyone on board by the start date,” Lewis adds. “My advice is to have honest introspection on the ability of your company to deliver.”

Think Scale

Lewis turned his 11-year business into one of the country’s fastest growing companies by considering his future growth opportunities from day one.. “From the very first contract and the very first employee, I constantly looked at everything as how will it work when we have a hundred contracts or a hundred employees,” he said.

RTL recently grew from 85 to 135 employees with the launch of the company's new energy division. Today, as RTL considers contracts involving 20 to 30 employees, it still relies on business processes learned from Lewis’ experiences working for big corporations and the military to make successful growth decisions.
“It’s one thing to win a contract,” Lewis says. “It’s another thing to win a contract and have a system or process to measure how far that contract gets you toward a goal.”

Spend Wisely

Obtaining funding is essential to any growth strategy. But it’s just as important to spend the right money on the right types of investments, says Jim Blasingame, President of the Small Business Network, Inc., and host of The Small Business Advocate radio show.

“Make sure that you’re spending money in the right way and getting it from the right source,” he says, whether that’s cash flow from operations, retained earnings, or debt. Consider the most strategic way to finance a long-term investment, such as new equipment, rather than raiding short-term operating cash, Blasingame explains.
No matter how much they grow, small businesses should always remember the relationship between cash and growth, Blasingame says. By extending credit to customers with terms that don’t meet the time limits you have to pay your own accounts, “you can succeed yourself right out of business,” he adds.

Have Good Relationships

Build good relationships with bankers and investors so they understand your business, and have regular meetings to let them known what opportunities your business is pursuing, Lewis says. “You want to keep them informed the whole time so they’re in it with you,” he said. “The relationship piece is incredibly important.”
Building partnerships with other businesses and consultants in your industry can also help you stretch your company’s resources until you’re ready to hire, says SCORE. The group’s experienced volunteer counselors can provide free advice on questions about growth or other small business issues.

The SBA’s regional development offices also help businesses assess whether or not they’re ready for growth by looking at their locality, industry, market share and internal capacity, adds Montgomery. “I honestly believe that the way business owners work through this is not to try to figure it out by themselves but to seek out an advisor or a mentor,” she says. “You're not alone.”

This article is part of a series in partnership with American Express OPEN. With the Enhanced Business Gold Rewards Card you get business-sized purchasing power to help you buy what you need when you need it. Learn more.

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