If you have already launched a small business and it is going well, there will come a time when you start to think about expanding it. It might be that you have already had to turn down some business because you’re too small to be able to handle it successfully. Or it might be that you find that you’re slowly but surely becoming much busier, and you know that you will need to expand to keep up with demand.
For some businesses, this is not a problem; there will be money in the accounts to spend on expansion. For others, however, cash flow can be an issue, which means that they are stuck. This is where you may choose to raise money another way to expand. Read on for some ideas.
What you will read in this article:
Borrow From Friends And Family
One of the easiest ways to borrow the money you require to expand is to talk to friends and family who might be willing to help. If you go down this route, there (probably) won’t be any need to delve too deeply into the company’s accounts – although you should always offer – and this can save a lot of time. Another bonus is that friends and family are unlikely to want an extremely high interest rate and will be much more flexible when it comes to payment terms. That doesn’t mean that you should be unreliable when it comes to paying the money back, as this would be unfair, but it does mean that you do have some leeway should something come up that creates an issue with your payment.
If you aren’t sure whether borrowing from loved ones will work for you, a personal loan is another idea to get the money to expand your business. It’s possible to get a loan even if you have bad credit, and you could put this money straight into the business. You would then need to arrange a repayment plan that means you’re not out of pocket, so look carefully at interest rates and what the terms of your original loan were before settling on a return from your business.
Angel investors are people who put money into other businesses in return for a percentage share. Angel investors will want to see a fair return on their initial investment, but if the company fails, they won’t expect to see their money back, which can be a relief and good security for business owners.
More than money, an angel investor will also give advice, and their expertise can be essential to smaller businesses looking to grow. It’s relatively easy to find an angel investor, thanks to the internet. There are groups on Facebook, for example, that contain people looking for businesses to put their money into, and if you search further afield, you will also find plenty of other websites that specialize in precisely this kind of lending. You will need to have an up to date and accurate business plan, and you will need to be ready to explain your business and exactly what you want the money for, so make sure you are prepared in advance.
Put Your Prices Up
If you don’t want to borrow any additional money to finance your business expansion, another option is to increase your prices. The more profit you make, the more ‘spare money’ you’ll have that can be ring fenced for your business growth. If you want to move to a larger office, for example, then get all the details and costs in advance so that you know what to work towards and you should be able to calculate how much you need to sell at your new, higher prices to get there. You may find that you don’t need to raise prices too much to realize the money you need, and this can be a relief; raising prices too quickly can turn customers away.
Instead of – or as well as – raising your prices, you can look at how much you’re buying stock in for. The larger the gap between what you pay and what you charge, the more profit you’ll make, and the more profit you make, the quicker you can expand. This means that when you’re ready to sell your business after reading this useful guide, you’ll be in a good position to do so.
Negotiating a better deal for your stock could help hugely in this regard. If you have been buying from the same suppliers for a long time, and you’ve always paid promptly and have a good relationship, obtaining a discount should be possible. If it isn’t, don’t worry; look around for a new supplier who can offer you the goods you want at a price that allows your profits to soar.