Small Business Expansion: What to Do, When to Do It, and How
As a small business owner, you know that the decisions you make ultimately affect your future success. Many small businesses never make it past 7 years, so it is important to stay updated about your market and make educated decisions. Here are some guidelines you can follow to help you decide the next big step for your business.
When to Expand Your Business
If your competitors are expanding.
If you can afford to.
If it is included in your future vision.
If you are ready to give up some power.
When to Sell Your Business
If the buyer’s offer is more than what your business.
If you want to retire.
If you are burnt out or unlikely to invest more in the growth of your business.
When to Close Your Business
If your debt-to-asset ratio is higher than 50%.
If your money loss is steadily increasing.
If your inventory turnover speed is decreasing
If you are rejected
How to Get Funding
Venture Capital –
This is very competitive method that can bring a high amount of potential, but only 600-800 businesses out of 2 million get this type of funding. Another thing to note is that although the funds are high, there is a high risk factor involved with it.
Seed Funding –
This type of funding is characterized by coming from savings or mortgage loans, and is used mostly by initial startups. The investors that are involved in this type of funding are usually a combination of friends, family, or owners.
Angel Investing –
This type of funding comes from a solely interested investor that expects a convertible debt or owner equity in return.
The Effects of a Down Economy on Small Business
Due to the rising amount of house foreclosures, many banks have incurred great losses, causing them to refuse giving out loans. This chain reaction places small businesses in difficult situations as they have no way to expand without money and the potential for layoffs greatly increases.
Statistics of Small Businesses in the Economy
99.7% of Employer Firms:
Take up 50% of private sector employees.
Compensate for 44% of the total U.S. private payroll.
Have created 65% of new jobs during the past 17 years.
Employ 43% of high tech workers, including scientists and engineers.
Consist of 52% home based businesses and 2% franchises.
Took up 97.5% of all identified exporters and brought 31% of export value in the 2008 fiscal year.
Generate 13 times more patents per employee than large patenting firms.
As you can see, small business, make an overall strong economical impact in the United States but are very susceptible to bankruptcy and debt. Use the above instructions to lead you to the path of success and prevent your business from becoming a statistic.