When Is the Right Time for Your Business to Spend to Grow?

If you want to grow your business, you might be thinking about when the right time to do it is. If you are not sure about what you need to have ready before taking this leap forward, this guide will help you out. It’s all about timing because if you get that wrong, your entire business could be at risk. That’s not what you want to happen. So, here are some indicators as to when the time might be right for your company to invest to grow.

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Things are on the up and up

If your business is failing and struggling, it’s clearly not the right time to be thinking about an expansion. You want your business to be on the up and heading in the right direction as you start thinking about expanding it. Even if things are going alright, not bad but not good either, it’s not the right time to start spending money on growing your business. You need to become solidly profitable before you start thinking about a next level.

Your team is ready and prepared

Expanding a business is not something that just happens. It only works if you have a team of people capable of making it happen. It’s easy to think only the people at the top matter, we’ve all been there. But it’s a real team effort when you’re trying to grow a business and take it to the next level. If your team isn’t prepared for the challenges that lie ahead, this whole project could fall flat and end in failure. So, prepare the team and be honest with them about what’s happening and what kinds of changes you want to see.

If you watched “Breaking Bad”, you’ll get the importance of being paid

You have access to cash

Expanding a business is not something that should be done on the cheap. You need to spend money in order to grow and make your business better and bigger than it is right now. But where is that money going to come from? This is a question that you’re going to need to find an answer to sooner rather than later. Places like smallbusiness.creditcard can help if you need cash. There are also other options, such as selling equity and finding investors. Some business simply decide to reinvest profits.

You’ve assessed all the risks

It’s essential to look at the potential risks your business is likely to face as you grow it and spend money to improve it. If you don’t assess all of the risks before pushing forward, you will simply put your business in a more risky position.

Assessing the risks involves knowing what can go wrong, and once you know these things, you should move onto the mitigation stage. This is when you put measures and assurances in place to make sure you don’t do anything that will be likely to harm the business.

Spending to grow is never an easy thing to get right when you run a business. But that doesn’t mean you should run away and hide. Just make sure you get your timing right.

Essentials of Business Cash Flow and Why You Need to Know Them

If there is one term that a new business owner hears more than any other it is ‘cash flow’. As someone who is new to running a business, you may be aware that this is something that you need to worry about but may not be sure of the details. This may not be the part of the business that actually interests you! You may be far more fascinated with the creative or technological aspects of running your enterprise. Unfortunately, cash flow is something that all business owners need to know about and here are the basics that you need to learn.

What exactly is cash flow?

Cash flow is money. It is the sum of money that is moving in and out of your business. It is usually measured on a weekly or monthly basis.

Cash enters your business when a customer or client pays an invoice for a product or a service. In some businesses, they will pay immediately and this is typical in a shop. However, in other businesses, you will provide the product or the service and then you will issue them with an invoice. You will not get the money until that invoice is paid and this is where the problem can arise!

The ‘flow’ of money into your business has ceased. You can get around this because Interstate Capital provides spot loans to small businesses which you can use to get you by when invoices are paid late. It ensures that money is still flowing into your business.

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Cash flowing out of your business

Obviously, cash flow is not just about cash flowing into your business. Cash needs to flow out as well. You will need to pay for expenses such as mortgage repayments, rent, consumables, employee salaries and tax payments. These have to be paid on time. If you are late making a payment you run the risk of incurring a financial penalty or a fine.

Your business is described as having a “positive cash flow” if more money is coming in than is going out. However, if you have a “negative cash flow” you do not have enough money coming in to pay your bills and you are heading for trouble.

Why cash flow is vitally important to your business

Poor cash flow is one of the biggest reasons for new business failure. Yet some small businesses will survive. In general, the business owners that have a reserve of money to get them through the hard times will be the ones who are successful. This could be your own private savings or a loan.

Information and cash flow

You cannot work out how your cash flow is doing without information so get in the habit of generating a monthly cash flow report.

A quick and easy way to do this is to compare the total unpaid purchases to the total sales due at the end of each month. If your analysis shows that the total unpaid purchases are greater than the total sales due this indicates a potential cash flow problem.

Unnecessary Costs of Starting a Business

There are plenty of costs involved when starting a business (hiring people, office rental, energy costs, etc.) with the average start-up cost coming in at around $30,000. On the flip-side, micro-businesses can be kick-started at approximately $3,000 or less.

While many initial costs are necessary, it’s fair to say that many are, in fact, a wasteful investment. And, given that cash flow and investment is all-important at the early startup stage, it makes sense for new businesses to avoid unnecessary expenses and eliminate them entirely.

At first glance some of these costs may appear to be minimal, when you add them all up, you could arrive at a significant amount of money. Which, of course, could be much better invested elsewhere, and provide you with a stronger foundation for success.

Here are four things to consider that can help you reduce any unnecessary costs of starting a business.

Hire flexible people

If you can avoid hiring people for as long as possible, it’s advisable.

Ultimately, as your business grows you’ll have to consider taking on people (employees) to give you a helping hand — just be strategic and selective with the personalities you hire. Your startup should be looking for very specific types of individuals in its early stages.

You need employees with multiple skill sets and the ability to help you out with various tasks in a variety of areas (maybe social media and sales generation).

Naturally as you begin to make more money, you can hire people for specific roles and define the role of existing employees. But in the early stages, flexible people are key.

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Don’t rent an office straight away

Room rental and rates will cost you money you can’t afford as a startup. It makes no sense to spend all that cash on an office when there are so many other options to consider.

For example, the go-to is working from a home office to save on rent altogether. Or you might visit The Hoxton Mix or a similar co-working space in your area to rent a cheap desk — or just use as a virtual address. Coffee franchises like Starbucks, have become quite popular as daily work areas for “solopreneurs”. I written a few articles for Virgin.com from there.

And there maybe other small businesses in your area who would be willing to rent out a single desk for you to work on your business, for a much lower market rate than you would find anywhere else.

Watch your energy usage

Wherever your business is, make sure that you are keeping on top of your energy bills. Even the simple act of turning off a light when you leave a room can help you save a significant sum of money over your first year.

And if you apply the same efficiency principles to every other electrical device, you will find those savings start to multiply by a huge amount.

Trade in your expensive analog phone line and use smartphone or laptop with services like Skype and Google Hangouts instead. With more people getting used to contacting businesses online, phone lines are an unnecessary initial cost.

It’s also important to factor in your energy usage into your quotation and invoice, particularly if you’re providing a service like web design, application development, graphic design, interior design, writing, editing, and just anything else that requires you using software to create a product. This will help you recoup some of the costs.

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Paying and being paid

A final point — never forget the importance of cash flow to your business. You always want to be cash flow positive. It will save you from significant debt over your first couple of years.

Try and collect any monies owed as quickly as possible, while holding on to your own payments for as long as possible. It’s imperative that you invoice your clients to get paid on-time.

Set-up lines of credit if necessary, as you will often find that the interest rates involved are much lower than you will find on a credit card.

But, all things considered, it’s always best to bootstrap your company by growing at a steady pace and reinvesting your earnings.