Why are you expanding?

To make more money, handle more customers, and/or hire employees?

To Grow or Not To Grow

Seasoned owners learn that it's sometimes just as perilous to stand still as it is to move ahead.

For any healthy business, there comes a point when the owners must decide to take the risk of a new growth strategy or to take the risk of staying with their current game plan. I mention risk in both cases because the risk of doing nothing or even of sticking to "business as usual" in the face of a changing market can be even greater than the risk of taking on larger bank loans, more debt, more employees and more uncertainty in order to grow.

Why? Because the longer you stay in the business game, the more sophisticated the players become and the higher the stakes. That is what makes it fun (or at least never boring) and keeps entrepreneurs coming back for more, despite the ups and downs. Newcomers can enter market niches that are being ignored by players already in the field, but eventually these players will wake up and muscle into your game. Women seem to have a harder time than men learning this. They more often make the mistake of thinking that owning a business means merely making money. The real goal, however, is to increase your net worth, not just your income. Your net worth is the assets your business owns after paying off all your creditors (1iabilities). Assets include not just cash, but real estate, equipment and even the value of the "goodwill" your firm has built up.

Misunderstanding the true nature of the business game is one of the major factors that hold women back. We still see our businesses as extensions of our personalities rather than business investments. We still pride ourselves on "paying as we go" rather than understanding that the basic rule of capitalism is not just to make capital but to put capital (your assets or business worth) to use through "leverage". A basic tenet of business, leverage means using someone else's money to make more money. You use your money as collateral to borrow more money to increase sales, which can in turn be used to leverage UP the net worth of your firm. Why do most women not play the business game like men? It may be because we really prefer to run small businesses that generate income (money to live on) but not wealth (assets you amass). Or, because of its scale, income may fit better into our lifestyles. Or it may be simply that we never learned how to play on a larger scale. The key point to examine is whether you are staying small because you want to or because you are afraid to grow.

Here are some steps that will help you make a rational decision.

Ask yourself what goals you have for yourself and your company.

Ask yourself if you are limiting the growth of your company because of personal fears.

Ask yourself what would happen if you took this move and what would happen if you didn't take it. Refine your decision-making techniques.

Learn about how other businesses have grown through leveraging.

Remember, every day in business will bring a new decision about growth. It is interesting that the Chinese use the same symbol for risk and opportunity. After all, you cannot reap the benefit from an Opportunity unless you take a risk. We learn this when we first start businesses. Why then is it so hard to keep remembering it?

(by Charlotte Taylor, Venture Concepts, in association with New Jersey Association of Women Business Owners, Inc., Originally appeared in Working Woman)

 

Page 2 - Managing Growth

Page 3 - Time to Hire