1. Define your ideal customer
When you first started your business, you may have tested out different product lines and service offerings. Now that you have a better idea as to what generates your desired level of profit, it’s time to prune your high-cost, low-value customers. These are the folks who purchase the cheapest product in the store but only do so after wasting an hour of the salesperson’s time. They’re the people who sign up for free trial offers but never upgrade and end up wasting your tech support’s time. They’re also the dead weight on your bottom line– and you need to let them go.
The key to rapid growth is to do one thing exceptionally well for a small, select audience. Being so specific can feel a bit intimidating at first, but don’t be scared. Saying no to customers who are a poor fit will save you time, money and aggravation– all while freeing up your resources to target the right prospects.
2. Create customer profile segments
While the broader audience in your ideal customer profile will share many similar traits, it’s still possible to get more specific by segmenting this audience. For example, one natural division could be existing customers versus prospective customers versus former customers. Your marketing messages will differ depending on your relationship with these individuals, even if the audience as a whole still falls under your ideal customer profile.
As you create your audience segments (also known as buyer personas), consider each segment’s economic value to your company, the ease of outreach and the segment’s potential for future growth or expansion. Is there a sub-set of lapsed customers that might come back with an attractive re-activation offer? What about your current customers: how can you best maximize their value by keeping them loyal to your business and also upselling them on your service offerings? While all these segments may be valuable to your business, targeting the lowest hanging fruit first will build recurring revenue and help finance your future expansion efforts.
3. Be realistic about your capital needs
In an ideal world, we’d all be sitting on a pot of gold that could finance our business expansion plans. In reality, of course, many small business owners do bootstrap their startup– and also forgo any real salary or benefits in an effort to get the business off the ground. If you’re a bricks and mortar business seeking to expand, you’ll need an influx of capital to fund this expansion. Since very few small business owners have the capital on hand that’s necessary to build a new storefront or upgrade machinery, a small business loan can help bridge this gap.
Of course, it never makes sense for a small business to go into debt if that debt is ill-advised. When deciding whether a small business loan is right for your expansion needs, carefully weigh the loan terms, your capital needs, the potential benefits, and your long-term business plan. Sure, investing in a new satellite operation may seem like a smart plan now, but is the market there to support this expansion? Likewise, if you find yourself facing a cash-flow shortfall, is this shortfall likely to recur again, or is it a one-time setback? You don’t want to expand faster than your business can keep up.
4. Measure, analyze and pivot
How do you know if your expansion strategy is working? Yes, your monthly cash flow forecast will help you know if you’re in the green or red, but these numbers only tell part of the story. Small business accountants recommend keeping a close eye on performance KPIs, including your gross profit margin (GPM) as a percentage of sales, your drop-off rate, your revenue growth rate, your inventory turnover (if applicable), your accounts payable turnover, and your relative market share.