Take your small business to the next level

You can take your small business to the next level as scaling a business is a crucial step for SME owners in South Africa who want to unlock their full potential.

As an entrepreneur and business owner, recognising the right time to take your business to the next level and understanding the challenges of expansion is essential for positioning your business for long-term success.

Key factors in growing a small business

However, taking a business to the next level can be one of the most difficult decisions a small business owner can make as it is often filled with uncertainty.

The decision is never straightforward because you have to consider various aspects, such as the current state of the business and its growth trajectory, the stage of growth, timing and market conditions.

Scaling a business refers to growing and expanding operations to handle increased demand, generate higher revenue and maintain profitability. Whether a business intends to take on more clients, capture new markets, or expand internationally, there are key factors to consider.

Cultivate a growth mindset

That is why Rean Bloem, general manager of funding at Retail Capital, a division of TymeBank, suggests that business owners cultivate a growth mindset from the beginning, as it is key to the success of a business.

He also advises including scalability in the business strategy from the outset, as this will inform how the business will adapt and grow to meet future demands.

“A growth mindset will enable you as a business owner to identify potential hurdles, allocate resources efficiently and make informed decisions that support long-term growth.

“A scalability plan communicates your future vision and showcases the growth potential of your business, making it attractive to investors and stakeholders. It also outlines financial projections and capital needs, providing clarity on funding requirements for scaling your business,” he explains.

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Scaling can help with small business productivity

Bloem believes enabling small businesses in the country to scale up can help address low productivity and widening income gaps. Small businesses that grow can have a considerable effect on innovation, job creation and contribute significantly to the overall growth of a strong economy.

“With proper planning and execution, business owners can navigate the challenges of expansion and achieve sustainable growth,” he says.

Timing

Determining the right time to scale a business depends on several indicators.

Bloem says business owners must look for signs of consistent profitability, strong market demand and a solid customer base because these indicators suggest that the business has reached a stable and sustainable stage, making it suitable for scaling.

“Market conditions also play a crucial role to determine the timing to scale. By analysing industry trends, the competitive landscape and economic environment to identify favourable conditions for growth, you can assess the scalability of your small business.”

Operational readiness

Bloem says another important consideration is your business’s operational readiness for growth.

You can determine this by evaluating technology systems, supply chain management, financial management and customer service capabilities to ensure they can support the increased demand of scaling.

“There is nothing more dangerous for a growing business than being unable to meet increased enquiries that cannot be managed timeously. Securing finance to facilitate business growth is a natural step in the scalability process and it is essential to evaluate the stage of the business and its growth plans before deciding on the most appropriate funding solution.”

In addition, you must evaluate funding sources based on the unique needs and growth trajectory of your business.

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Funding options for a small business

Bloem also notes that there are funding solutions for each stage of a business: seed funding, early-stage funding, growth funding and expansion funding.

Seed funding is suitable for startups to help them develop their business ideas or a new product. Self-funding, bootstrapping, or support from friends and family can provide the necessary capital during the initial stages when access to funding may be limited.

Early stage funding is necessary during the early stage of a business’s development to cover the cost of daily operations until the business becomes profitable.

Options such as bank loans, venture capital, angel investors, or small business grants become viable and alternative funders like Retail Capital may also be willing to assist, provided the business shows potential and has a feasible business plan.

Growth funding kicks in once your business is established and ready for the next level of growth. This funding can be used to increase your business’s capacity, buy additional vehicles, move to larger premises, or open a second location.

Options for growth funding include venture capital investments, growth equity financing, bank loans, lines of credit, strategic partnerships or alliances and alternative funders.

Expansion funding becomes an option when your business has proven its capabilities and may want to expand operations into new territories, increase production capabilities, or enhance facilities.

These initiatives require significant capital investment and venture capital firms or angel investors can provide funding in exchange for equity or ownership stakes.

Other funding options include private equity investments or mezzanine financing in the form of a business loan that offers repayment terms adapted to the company’s cash flows.

Strategic partnerships or joint ventures also offer the advantage of additional expertise, industry connections and financial investment.

“Always write down your business plan, financial projections and a compelling pitch when seeking funding. Where possible, consult financial advisors, business development organisations, or industry-specific associations for guidance,” Bloem says.

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A good credit record

Maintaining a strong credit record is crucial when seeking funding for scaling your business, Bloem says.

“Lenders and investors assess your creditworthiness to determine the risk associated with lending to your business. A solid credit record, built through timely payments, responsible financial management and maintaining low debt levels, enhances your credibility and increases the likelihood of securing funding.

“Scaling your business is like embarking on a thrilling expedition to new heights. With careful planning, strategic decisions, and a dedicated team, you can conquer new horizons of success. Remember, scaling is a dynamic process, so be open to adjustments, stay focused, and celebrate milestones along the way,” Bloem says.