How to Handle the Costs of a Growing Business
It is one of the the greatest ironies in business that experiencing a boom in business it is often cause for serious stress as much as popping the champagne. This is because strong growth is often cause for considerable strain on company finances - and how well that is handled can have major consequences.
How should you plan for your growing business? What’s the best next step for your team? It depends on your industry, the size of company and your future plans.
Let’s explore how you can prioritize future costs for your growing business.
Outline your options
Chances are you already have some ideas on where you’d like to spend your new profits. Perhaps your employees are begging for new equipment to keep up with growing demand, or you’re ready to hire a marketing professional. Think critically about your company’s needs versus your wants.
Let your strategic growth plan be your guide
If you don’t have a strategic plan for your business, first invest in developing one. You can write one yourself, or hire a consultant to help you craft one. This tool will help you plan your progress towards your desired business goals. Most importantly for your growing capital it identifies priorities, helping you make future decisions.
Through the planning process you’ll identify what will help your business get to the next level. If you’re experiencing overwhelming demand, maybe that new equipment is the best investment at this point. If employees are getting pulled into creating marketing and not completing their work, it might be time to post that job description.
Impact, confidence, and effort (ICE)
The ICE Score is a method for prioritizing growth. Using ICE, you assign your options a numerical score based on three criteria:
Impact: How much will this affect the metric I want to improve?
Confidence: How confident are you that this will effectively solve your problem?
Effort: How easy will this be to implement?
Assign a number from 1-10 in each category. Add the three scores then divide by three to receive your total ICE score.
This system attempts to add quantitative support to a subjective decision. Your confidence in a solution may be different from another manager’s. Still, it is a helpful exercise for evaluating priorities.
Did the new equipment improve the number of orders your team was able to fulfill? Would a new employee have been more expensive, but better for efficiency? Continue to monitor your return on investment for business expenses.
Continue managing costs
Just because you have money to spend doesn’t mean you have money to waste. What worked when you were just starting may no longer be efficient as you grow. Continue to evaluate operations, eliminate redundancy and invest in tools that will improve efficiency.
Watch the industry
Staying updated on the latest market and industry trends will make you better informed for growing your business. Pay attention to which companies are growing and folding, and which market forces might impact you directly or indirectly. Watch what your competitors are doing: if they are adding new services for their clients, consider adjusting your growth strategy to account for new developments in field.
To learn more about developing a strategic growth plan for your company, contact one of our op tier financial consultants at Patin and Associates today.