Building and improving capacity
To meet the demands of increased growth, it’s likely that you’ll need to increase your capacity by either doing more with what you have or investing in new skills, expertise, and equipment.
Build in-house capacity
It’s possible that you can meet demands simply by enhancing your current in-house resources. Because this is a less costly route to take, it makes sense to start here, first.
Examine your needs and what skills are currently available to you via your staff. Identify gaps between what you need and what you have. Explore whether those gaps can be met with professional development, revised job descriptions, or additional training.
Enhance your systems
Good record-keeping and bookkeeping will help you know how your business is doing. It’s easy to track all your expenses and revenue if you use accounting software.
Automate everything that a customer expects to be automated. This could include:
PayPal to receive offshore funds, Shopify to run an online store, lightspeed to manage retail POS, Google Analytics to track web traffic, Mailchimp to send e-newsletters and of course Facebook, LinkedIn, and Twitter to run your social media campaigns. Find out which apps apply to your industry the most by talking to your industry association or other business owners.
Cashflow forecasting will enable you to anticipate a possible cashflow problem so you can act before it becomes a major issue. Some solutions include:
- Tight creditor and debtor control, such as invoicing promptly, collecting debts on time, and following up quickly if a payment is late or missed
- Reviewing your pricing and costing to ensure your sales are profitable and you’re earning enough from your sales to be sustainable
- Reducing operating expenses where possible to save money and reallocate those funds to more pressing activities.
Small business owners often complete a variety of routine daily tasks. Document each important or daily process in your business and then develop templates, repeatable processes, or standard forms to speed everyone up. The more automatic you can make daily tasks, the more efficient and scalable your business will be.
Tips for building external capacity
Once you’ve streamlined your business, the next step is to take the plunge and increase your overall capacity (checking that any increase in demand is sustainable).
Consider contractors
Identify third party contractors or other companies that could take up extra slack to increase your capacity at any time. It will free you or employees up to work on the more important parts of the business (such as marketing or delivery/production). Having various other people or businesses that you can contract parts of what you do can ease temporary capacity issues before you decide to employ full-timers or buy additional equipment or inventory space.
It also gives you flexibility because you can hire contractors only for the work that needs to be done, relying on them more or less as dictated by the market.
Review your equipment
If some of your equipment is outdated or obsolete, an upgrade may help you build more capacity. You could:
- Lease key equipment or machinery until the capacity issue is solved, or outsource some of the tasks that require additional machinery you can’t afford
- Investigate new technology that removes redundant processes or replaces manual tasks, such as software or other automated processes
- Buy new equipment, especially if the increased capacity will be needed for the long term to sustain prolonged growth
Purchasing new equipment can be expensive but remember that competitive advantage is gained from getting products to market quicker than your competition. Conduct a cash flow forecast to see the impact loan repayments have compared to the extra efficiencies or production you’ll gain.
Strategic alliances
Forming a business relationship with a partner or partners may provide you with a number of advantages. You may be able to access technologies or patented processes owned by the other partner. Additionally, you may be able to access their distribution network.
If you are thinking of forming a partnership, consider your strengths and weaknesses compared with your potential partners. The ideal partnership takes advantage of your core competencies while strengthening weaker areas of your business.
Well-chosen partnerships can provide advantages such as sharing the workload and time commitment, providing opportunities for growth for everyone involved, accessing resources, such as technology, and even needed support and motivation.
Raising capital
If you decide there is merit in expanding your capacity or improving your capability, you may need to spend money to make it happen. Some financial options include:
- Accessing funds from friends and family members
- Borrowing money from the bank
- Angel investors (often other business owners) who think your business is promising and are willing to buy into your business
- Venture capitalists
- Government and state assistance
- Corporate investors
- Crowdfunding
Next steps
Don’t be afraid to expand your operations if there’s enough demand to justify it. Explore whether you already have the capacity in-house but simply need to offer training or professional development. Then look at ways to streamline your current systems, explore your options for accessing new equipment, and find ways to finance your growth, if needed.
