There’s good news for small businesses. The interest rates are holding steady and there’s good GDP numbers out. Small Business Trends talked with Mark Davis, national managing partner of Deloitte Private Enterprises for Deloitte & Touche LLP.
How to Manage Business Growth
He offered 8 suggestions on what small businesses can do during this upswing that’s expected to last for the rest of 2019.
“I don’t think there’s ever been a better time to be a private company,” he said, adding that Deloitte has done a global survey for two years in a row.
That survey found 74% of private companies have extremely high confidence in their success in the next 12 months.
“There’s a tremendous amount of capital available to private companies,” Davis says. This loosening of the purse strings is a welcome change. For years after the 2008 recession, small businesses had a hard time getting financing to expand or run their businesses.
Now is a good time to look into borrowing some money to grow your small business. Banks and private equity firms are lending the money that had been sitting on the sidelines.
Davis says smaller companies looking to attract investors have decisions to make. The biggest one is how much control they are willing to give up. He also says 70% of startup investment money comes from family and friends.
“There are new sources like crowdsourcing that is taking off,” he says.
Davis says smaller companies should consider loans even if they’re not planning on using the money right away.
Think About Exit Strategies
When things are good, it’s always a best practice to look at the big picture. Sometimes that can include exit strategies for your small business when you’re looking to sell.
“What companies don’t realize is there’s a process that the buyers or investors will go through,” Davis says. Preparing all the details involved is critical.
He says that anyone interested in buying a business wants to see that it’s being managed well. It’s good to have somebody on the team who’s been through the process before. This is true for individual owners and other smaller family owned businesses who are looking for outside investors.
Having a financial audit done lends credibility. Without one, a possible purchaser might discount any of your financial numbers. Davis says hiring experts is a good idea. Experts like accountants and lawyers who have been through the process before are helpful.
Be Aware of New Accounting Changes
There’s a new lease accounting standard that comes into effect this year. Davis says small businesses need to be aware of this as they manage their growth. Getting ready for this change means SBAs need to prepare.
“It takes time and coordination,” Davis says. “It even takes people away from different parts of the business.”
He says that putting this off can actually hurt your growth.
Look at Your Loans
Now is also the right time to look at any existing loans your small business might have. Davis explains:
“Even if you’re not using the money, I’d look for an extension before it expires.”
In a strong economy, it’s easy to renegotiate the terms.
Stay Connected with Your Customers
This is especially true for your most important ones. It’s a good idea to make sure at least the top five to ten are doing well. That way, everyone is riding the good economic wave together. A struggling customer might be a drag on your growth.
Get on the phone and talk with them.
Get in Good with Your Employees
With unemployment as low as it is, this is a good time to polish up key relationships with your top workers.
“Its much harder to go out and hire somebody new, than satisfy someone who is unhappy,” Davis says.
Businesses can’t be rigid and grow in a positive economy. That’s good advice regardless of how the market is doing.
Deloitte suggests that small businesses should look ahead two to three years.
“Anything further than that gets really hard to predict.”
That advice is good when the economy isn’t doing well too.
Another component of keeping your top employees is that you often need to initiate discussions about increasing compensation/responsibility. Many employees are so terrified of starting that conversation they’ll look for a new job rather than do it. Be proactive.
Most businesses want growth but you should be ready for what will come after it.