The owner of a restaurant asks, “How can I increase my business.”On analysis, the business has social media exposure and the in-house business is strong as is the take-out business.The owner has two kitchens that are busy all the time.This translates to limited growth without doing something vastly different.
The owner is considering catering, but really does not have a list of clients that can help him get started. Increasing prices on the reasonably priced food may deter the clientele frequenting the business presently.It costs money to engage in most any activity to grow, suggesting that owner must borrow or raise private equity.
The situation is more common than one may think and it applies to many businesses.Having a strong business is great, but how does one grow without destroying current cash flows?Gradual growth is possible by diverting some of the earnings to a new direction. Equity raises can allow for debt free financings, but comes with diluted ownership and possible partners.Debt capital comes with interest that decreases the bottom line, assuming one can borrow the money at all.The choices exist but careful analysis is required to optimize potential for success.The following are a few common means of growing a small business.
- Expand: Some businesses can expand by opening new sites; this is how the common retail business grew. It takes great care to open sites that can produce satisfactory business with positive earnings; this is one reason some franchises review the proposed locations and standards for new stores. There is never a guarantee the new site will not be a big drain on cash, but you can be certain it will take your time to manage it along with your original site.
- Start delivery: Taking orders by phone increases the reach and market potential. The delivery is not free and the distance from the central location may limit the range of the business to within driving distance. Some businesses automatically refer clients to other businesses when the distance is too great and the delivery methods do not fit the product offering. For example, one local florist routinely discourages ordering from them if the product delivery is more than 20 miles away!
- Go On-Line: Some products have potential for on-line stores. Shipping via commercial carriers works well. If the product is a hit, the production may start to be an issue. Some people do not want to wait lengthy times before delivery. One can lose potential business by having product backordered. Customer engagement is more limited and developing a relationship is not as likely. Care is required on logistics to ensure limited backlogs or massive storage.
- Add new offerings: New product offerings can benefit most businesses. Sometimes new products may be premium priced. You may sell less, but make more money. New offerings are routine in the nutritional supplement business and cosmetics, for example. The new offerings are more important when the older ones meet heavy competition or not considered state of the art any longer.
- Buy competitors: One favorite of some businesses and investors is acquisition of competition; sometimes referred to as a “roll-up strategy.” This is especially interesting in highly fragmented business sectors where a larger organization can result in reduced overhead and better delivery to the market place. The increasing valuations eventually may result in an exit via acquisition by a larger company. Certain investors are very willing to participate if the strategy and management pass the review.
You can follow Taffy Williams on Twitter by @twilli2861 and you can email him with questions or contact him via company contact info in the website. More Startup information is contained in his personal blog.