SMEs are the backbone of New Zealand's economy, contributing towards 28 per cent of the country's total GDP, the Ministry of Business, Innovation and Employment reports. Their survival is therefore vital to the Kiwi economy.
While all businesses will want to grow eventually, it's important that they are genuinely ready for expansion before they start the process, otherwise they may fail.
How can businesses tell if they're ready for growth?
1) You have a regular (and growing) customer base
It's all very well getting lots of new customers in, but you need to make sure they keep coming back to know that you have a truly viable business. Repeat customers means recurring revenue to make your organisation more stable.
If you notice your clients want you to grow this is also a good sign. For example, have they been asking for new products, or do they want you to open a store at a new location? These are all great indicators that you are ready for expansion.
Just remember one sudden spike in customers isn't the same as a regular client base - this could just be due to seasonal demand and may not mean your business is completely viable yet.
2) You have regular (and increasing) profits
When your customer base grows, so too should your profits. Pursuing business growth can mean you operate at a loss for some time, as you'll be spending more to finance things like new warehouses or production centres. You therefore need to have enough capital on hand to finance these new projects and remain afloat.
3) Your systems and processes are flexible
As you grow you may wish to change your business model slightly, or operate in a different way to accommodate your newfound expansion. Your current systems and processes therefore must be sufficiently flexible that they can adapt to these changing circumstances.
Likewise you'll want to adjust your KPIs and business goals so that you can measure growth and know that your expansion strategy is working. You must be able to adjust your plans if you find they aren't working.
4) You're achieving your KPIs and business goals
Before you start setting growth KPIs, you need to be achieving your current goals. If not, spend some time focusing on accomplishing these before you begin any expansion strategies.
Once you've decided you are ready for growth, it's important to hire independent business advisers that will help you develop the best strategies to achieve your goals.
BDODrive is the new tailored service that brings together the full range of business advisory offerings from BDO New Zealand. It can help organisations expand sustainably and get you to where you want to be.
Contact us today for more information.