Smart small business owners don’t wait to consider borrowing money until a pressing need arises. They know that taking advantage of the right kind of financing is one of the most important ways to build a business.
Owning your location can benefit your business in numerous ways. You may be able to trade a monthly lease payment with the potential to increase at each renewal for the fixed cost of a loan. This financial stability can give you more clarity for long-term planning. By buying, you can also gain an asset that has the potential to appreciate in value over time and possibly enable you to reduce your tax bills. You should always consult with a tax advisor, however, to determine any tax implications for your business.
Purchasing can also provide flexibility to design a workflow that maximizes productivity in a manufacturing or other workspace. These efficiencies can pay off in increased efficiency and lower costs. For restaurants and retail stores, where having a good location is key, a purchase can help you avoid being priced out of a neighborhood as it appreciates.
Developing a new product line can expand your company’s reach and boost revenues. It can also enable you to keep current customers happy and prevent them from straying to a competitor to get an ancillary service or product. A new product offering is also a means of positioning your company to appeal to a larger market of customers.
To help uncover a good expansion opportunity, embark on some market research. Start by making sure you have a good process for collecting information about what new trends or offerings customers have expressed interest in. Depending on the nature of your business, you may decide to build out a research and development capacity with added space and staff.
Big-ticket purchases that can help you increase your productivity, lower costs or improve your processes can be a very strategic use of financing. Improvements in speed and efficiency may also allow you to save time and serve more clients.
Consider whether any of your existing equipment could be upgraded, or if something completely new might be a smart buy. Would buying a delivery vehicle allow you to increase your customer service area? Would investing in a nimble new excavator expand the range of services your landscaping business could offer? A state-of-the-art laser system could help a dermatologist serve a growing number of patients seeking tattoo removal.
Consider what investments make strategic sense for your business.
Even a thriving company can be strained by high debt costs, and you may not realize how much you can save by refinancing a high-interest loan. For example, many owners use credit cards to help cover startup costs when launching their business. Refinancing $20,000 of high-cost credit card debt with a lower-rate bank or online loan can offer considerable savings. In that scenario, lowering your rate by 10 percentage points could shave more than $100 per month off your payment and save over $6,000 in interest charges over five years.1 Reducing the size of your monthly payment can improve cash flow. That would allow you to invest more in your business by adding inventory or staffing hours.
The quality of your staff can make or break your business. If customer service is lagging, customers are waiting in line, or sales calls are languishing, it may be a sign that you need to hire. Adding on higher-level managers— or training existing employees to take on new roles— can also take responsibilities off your plate, giving you more time to develop your business.
Training can also allow you to broaden and deepen your expertise, helping you add services to your offerings and be more responsive to your existing clients. A survey by the American Society for Training and Development found that companies that offered comprehensive training to their staff had 24 percent higher profit margins than those who spent less on training.2 Employee training and educational expenses may also be tax-deductible. You should always consult with a tax advisor, however, to determine any tax implications for your business.
Sometimes the best way to grow and compete is to acquire another company. Perhaps a competitor is looking to sell, or a company with complementary offerings is available. Buying a company that’s already established and profitable may allow you to clear some of the hurdles that come when launching a new endeavor, such as finding sales staff who know the market or setting up supply chains.
An acquisition can also allow you to bring in assets that you can rely on for future growth. Do you have a small supplier whose products you’ve come to rely on as an important part of your supply chain? Buying its business may also ensure not only ongoing access but a potentially complementary expansion.
You can set your business apart from competitors with an up-to-date online presence. More than 80 percent of consumers look online first before making a purchase, according to a GE Capital study.3 Good online visibility, use of social media where it helps you connect with your market, and a plan to serve your customers online wherever they happen to be can all provide a competitive advantage. Few Internet searchers go beyond the first page of results, and the highest-ranked results receive by far the most clicks.
“Building a strong digital presence for your business requires strategic investment.”
You may want to hire someone to redesign your website, update your social media profiles, or revamp your content to improve your search engine rankings. This can help consumers find you more easily and build trust in your brand. Also consider launching ongoing email marketing and online advertising campaigns to increase your brand’s visibility.
Using technology to make it easier for customers and prospects to do business with you is also increasingly important. “Omnichannel” approaches aim to serve your customer wherever they choose to interact with you, whether online, via phone, or at a brick-and-mortar store. You want to make it possible for them to browse your current inventory, buy, and return products in whatever way is most convenient for them. Some customers also like to be able to complete transactions that they started online using another channel— for example, placing an order on the web and picking it up in-store. Investing in an omnichannel approach makes it easier for customers to do business with you, which may increase sales.
These ideas are just a few of the ways that creative use of capital can help your company grow. By thinking proactively about new opportunities, you can use financing to help build a solid foundation for your company’s future.