4 must-know tips for expanding your small business in the Canadian service industry
It’s the stage where most entrepreneurs get stuck: there’s work coming in, but not enough to ramp up a better business infrastructure.
Fluctuating income is a real problem for small business owners. So-called “lumpy sales” lead to “lumpy cash flow” and “lumpy operations.” These problems prevent promising early-stage companies from investing in resources such as permanent staff, smarter technology, broader marketing and professional support systems, like in-house bookkeeping and lead generation.
Without these resources, businesses get stuck in a feast-and-famine cycle: they must deal with work as it arrives, but lack bandwidth to do other things simultaneously such as marketing and selling. This makes it difficult to ensure more work arrives once current projects are satisfied.
Entrepreneurs facing this particular kind of “break out challenge” may consider several options.
“We’re considering pursuing venture capital funding of $500,000” says Louis Trahan, founder and president of LastMinuteTraining.ca, an online marketplace connecting organizations selling IT and management courses with companies who want training. “Because our business is established and profitable, with good overall numbers, we think we’re a good candidate.”
It’s a sophisticated portal connecting hundreds of training providers with thousands of training participants. In business since 2005 and with offices in Toronto’s east end, Last Minute Training has five employees and a number of supporting vendors.
While some of the money would be used to hire additional staff, Trahan says he’d invest most of the $500,000 in marketing to attract more corporate clients, and to improve the customer experience and increase conversions on his website.
“An investment in marketing will help us to both increase and stabilize sales. That stability would allow us to confidently invest in infrastructure to fuel further growth,” explains Trahan.
Sweat it out
Rather than take someone else’s money, which may not be an option for many businesses stuck in the “break out” stage, entrepreneurs may decide to take baby steps toward expansion.
For example, rather than take venture capital, Trahan could decide to focus on small, affordable advances within his current power.
“If I didn’t have a lot of money to spend, I’d use the little money we have to focus more on our website analytics,” he says, adding that this would point to what can be improved online to convert more traffic into customers.
Entrepreneurs choosing this option need two things: patience and creativity.
Patience means being satisfied with small victories and short steps toward sustainability — the long view instead of the pursuit of overnight riches. Creativity involves outside-the-box thinking applied to every part of the business, with particular focus on squeezing more value from current financial, human or technology resources.
Leap of faith
In his book, The Art of the Deal, mega-developer Donald Trump retold accounts of his multi-million dollar high-wire balancing acts to secure property development deals for what are now some of New York City’s most recognized buildings. His juggling typically involved large commercial lenders, skeptical government offices, unfriendly politicians, concerned residents and anxious property sellers. To him, juggling huge promises and commitments involved little overall risk. He was more concerned about losing a deal than taking a leap.
For a small business, that leap of faith might be investing in a new full-time employee who could double sales within a year – despite having just enough money in the bank to cover that employee’s salary for three months.
These leaps of faith may seem risky – depending on whom you ask.
To some entrepreneurs, sticking their neck out because they believe in the short-term income potential of a business may not seem like much risk at all. On the other side, entrepreneurs who are uncomfortable with uncertainty can make moves to mitigate the risk, such as securing a larger line of credit to shore up short-term financial resources.
Know when it’s time
Like most things in life and business, when it comes to expansion, timing is everything. Here are some signs that can indicate when it’s right to make a move:
Sales volume swells for three months and then dips for one or two months. Improvements to the marketing machinery would level out sales to create consistent income.
Lots of work (almost too much to manage) for three to four months followed by very little work. An investment in more employees or additional vendor support or operational efficiencies will increase production bandwidth so the business can confidently assume even more jobs.
There’s extra money in the bank – enough to make a small investment in the business. Using the “sweat it out” approach, even a few thousand dollars of surplus cash placed strategically in growth assets — such as a better website, a faster computer or a part-time virtual assistant to place prospecting calls — can make a big difference.
Simply sensing the time is right — a “gut feeling” encouraging the entrepreneur to make a bold move.
“I know it’s our time to expand,” comments Trahan. “We know what we’re doing, we’ve got some extra cash, our team is functioning well, our brand is starting to be known and our income is predictable.”
There comes a moment in every entrepreneur’s career where the business they’ve built either plateaus or soars. Some entrepreneurs will go for it, while others may decide expansion just isn’t in the cards. And, so long as business remains steady, there’s nothing wrong with that.