Key Steps Your Business Is Ready To Grow

If your business is turning a profit and its future outlook is positive, it might be time to consider expansion. Expanding your business can come in different forms, but it always requires careful planning and the right financial partnerships. Below are a few steps that your business may be ready to grow.

Product or Service Expansion

One of the most common types of business growth is the introduction of new offerings. This type of expansion typically takes one of two forms: preparing to launch a brand-new product to the market or considering expanding your available services. For instance, if you are an owner of a successful residential landscaping company, you notice that your revenue drops during the winter, but your customers frequently ask if you provide commercial snow removal or holiday light installation. By adding these services, you use your existing trucks and staff to generate year-round income without needing to find new customers.

However, a successful launch requires more than just a great idea. Before diving in, conduct thorough market research to ensure that there is demand for these new offerings. This involves analyzing competitor pricing and identifying specific customer pain points. Once you have confirmed the market demand, address the logistical and financial hurdles of scaling a small business.

With this type of business growth, there are a couple ways a bank can provide financial assistance:

• Business Line of Credit: Opening a line of credit helps stretch your cash flow so you don’t feel the crunch each month when it is time for payroll or inventory purchases. It provides a flexible safety net as you wait for the revenue from your new product.
• Working Capital Loan: You can also work with your bank to gain access to dedicated working capital. This type of loan is specifically designed to cover immediate operational costs related to growth — such as hiring additional employees, increasing your material inventory or covering rent for expanded production space.

Real Estate

If you have outgrown your current location, it might be a good time to explore additional storefronts or other real estate that will better meet your growing business needs. Think of a local bakery that started in a small, rented kitchen. They may now have a line out the door every morning and are forced to turn away large catering orders because they simply don't have enough oven space. Moving to a larger building with a dedicated storefront and a commercial-grade kitchen allows them to serve more walk-in customers while taking on those big corporate contracts.

Real estate construction loans help finance the acquisition and development of residential properties, owner-occupied facilities and income-producing properties. Instead of just paying rent to a landlord, you build equity by buying your own real estate. This shift from a monthly expense to an owned asset significantly strengthens your company’s financial future.

Business Acquisition

Another way to expand your business is by purchasing an existing company. When you acquire a business, the company you are purchasing is fully absorbed into yours. This creates one larger business with people, processes and resources that need to be brought together efficiently. 

If you own a successful coffee roasting business and want to open a cafe, instead of finding a location and building a customer base from scratch you might purchase a popular local coffee shop that is looking to sell. You instantly have a prime location, experienced baristas and a loyal group of daily regulars who already love the spot.

Look to your banker to help you evaluate the processes that are in place for each business — yours and the one you are acquiring. Your banker can help you identify financial products that will streamline processes, identify short-term financing to manage cash flow fluctuations and reduce your payables costs during the transition. They can also help you structure a loan based on the combined income of both businesses. This ensures that you have enough cash on hand to keep operations running smoothly while you merge the two brands.

The success of small businesses helps drive not only the success of banks, but the success of the community.

When you choose Northwest Bank for the necessary services to keep your small business running, together we can play an important role in strengthening our communities. Contact a Business Banker today to learn how to expand your business.