While your business may start out small, it doesn’t have to remain that way. One of the main reasons why SMEs seek a business loan is to assist with business expansion, and this trend doesn’t seem to be slowing down any time soon.
More Australian small businesses reported growth in the last year than in any year since 2014. So, what does business expansion involve? And how can you jump on the business growth bandwagon?
Keep reading our complete guide to business expansion to find out.
What is a business credit card?
Business expansion simply refers to the growth of a business' product and service offerings
Types of Business Expansion
When considering expanding your business, you’ll find that there are 5 common types of business expansion models. To learn more about this topic, it’s important that you know what each model is, along with what it involves.
Market Penetration: Perhaps the best-known, but most affordable method of expansion, market penetration includes expanding your consumer base in an already established market.
Market Expansion: Ever considered bringing your product into a new territory or another demographic? Put simply, this is market expansion.
Product Expansion: This is when you keep your base market, but either add new products or services to further appeal to your customers.
Diversification: Diversification is similar to product expansion, yet a lot more complicated (and risky). It’s when you offer new products to new markets altogether. For example, if a woman’s accessory label was to begin also selling men’s ties, this is diversification.
Acquisition: By acquiring an existing business (particularly a competitor), a small business can instantly increase their customer base and marketability.
Business expansion offers many benefits for small-medium enterprises, including
Like many business-related decisions, business growth does come with some potential setbacks. The most common disadvantages of business growth include:
It’s important for small business owners to understand that in order to move forward, they must often make sacrifices. The trick to determining if business expansion is right for you is to weigh up the pros and cons before making a final decision.
In some cases, a business might not intend to grow so rapidly, but will find themselves experiencing unexpected demand. To accommodate sudden business growth, we recommend you focus on the following:
Build a flexible and agile team
As a leader, you’ll need to be flexible and agile enough to adapt your vision and strategies in times of rapid growth. In saying that, you’ll also need a team of employees who are able to do the same, especially when their workload or responsibilities dramatically increase. When it comes to the unexpected challenges of business growth, the right team can either make or break you.
Focus on systems that work at scale
Becoming an overnight success is the dream of every small business owner, that is, unless you don’t have the proper systems in place to handle a rapid increase in sales. There’s no doubt that you’ll already have systems handling back-end support, fulfillment, and delivery, but can these scale to accommodate sudden growth on a large scale? If the answer is no, then you’ll have to address this as soon as possible to avoid frustrated customers and staff.
Don’t be distracted by new ideas
When your business suddenly booms, you can easily become distracted by new ideas for products or services to continue riding this wave of success. Here’s the thing though: in order for you to experience this rapid growth, customers are loving what you’re doing already. Focus on this for the time being, before making sudden decisions to diversify.
Boost your working capital with a business loan
If unexpected business growth has got you run off your feet and unable to keep up with demand, a business loan can help. When you apply for an unsecured business loan through an alternative lender such as Lumi, your acquired funds can help you hire more staff, upgrade your equipment, or purchase additional stock. Here’s 12 more ways a business loan can help you.
There are many different types of business credit card, including rewards cards, interest-free days cards, low rate cards and corporate cards. Shop around to find the product with the most suitable and beneficial features for your business. While low fees, low rates and high rewards are attractive, you also want card features that will make it cost effective for your business.
Remember a business credit card limits spending to business expenses only.
Fees and interest rates for business credit cards are generally higher than those for personal credit cards because they have more features. They can also be more expensive than other loan types, as credit cards aren’t secured by collateral like loans are. Charges can add up if you don’t pay the balance off every month, so consider how you will use the card.
Business Credit Card FAQ
What information do I need to apply for a business card?
In most cases, you will need to provide basic information about yourself and your business. Additional information, such as the legal business name, business structure, date it was formed, and your business’s total annual revenue may also be required.
How long will it take to receive my card?
This will vary, depending on the lender. Most individuals find that their business credit card will arrive within 7-10 days after approval.
Are business credit card expenses tax deductible?
Generally, most ordinary business expenses are tax deductible and this can include the costs and fees associated with maintaining your business credit card. Always ask your accountant about which business tax deductions are applicable to you.
What should I look for when shopping for a business credit card?
Two of the most important factors you’ll want to consider include the interest rate and any rewards offered. You want your business credit card to provide you with plenty of benefits, as well as to offer a system that works best for your business. It is recommended that you always read your business credit card policy carefully. See the section titled “9 reasons businesses may choose to use a business credit card” above for more factors to look for when choosing a business credit card.