Don’t Spring Ahead Just to Fall Back
Spring is the season of growth, and SMBs are benefitting. After a positive fourth quarter in 2017, small and medium businesses were poised for growth, reporting better access to bank loans and increased hiring. The Pepperdine Private Capital Access Index report*, done in partnership with Dun & Bradstreet, showed high levels of confidence from SMBs as the U.S. economy stabilized.
Small Businesses Report More Bank Loans, Increased Hiring
- 84% of SMBs surveyed expect their business to perform better in 2018 than in 2017 (a 72% percent increase from Q4 2017).
- Fewer SMBs reported that the current business financing environment is hindering their growth opportunities (down nearly 9% percent) compared to one year ago.
- Small businesses reported higher success rates in accessing financing from bank loans (37% in Q4 2017, up from 29% in Q4 2016).
However, with great growth comes great risk. Here are the most important things to know and watch out for when your business is in full bloom.
Don’t Sow More Than You Can Reap
Just because you finally have opportunity and resources to grow, doesn’t mean it’s all up from here. If you take on more contracts or jobs than your company can handle, you may end up taking two steps back. You’ll need to manage your cash flow and make sure you’ve got the funding you need in case things go awry. If a partner pays late or leaves you with bad debt, you still have to deliver on your other contracts, and should be prepared with extra cash reserves. If you’re not careful here, you could grow yourself out of business, or damage your business credit.
Don’t Forget to Water the Plants
As you grow, tasks that you previously had time for may suddenly fall off your radar, but you don’t want to forget to water the plants, so to speak. Keeping up with things like your business credit file will become even more crucial as you increase your working relationships. Now is when you may need to use new capital to hire more employees or let someone manage your business credit file for you. You’ll have many more risks to worry about as you grow, but you shouldn’t let anything fall through the cracks, either.
Do Plan for Bad Weather (Figuratively and Literally)
Small businesses that contracted with Toys “R” Us were left to pick up the pieces after the company filed for bankruptcy in early 2018. As you take on new contracts, you need to develop a safety net for your business in case of emergency. Making sure you don’t have all your eggs in one basket is a good place to start, but you should also make sure you are monitoring your business partner’s credit files, so you can anticipate late payments or bankruptcy.
Literal bad weather is something you need to prepare for as well. Despite several natural disasters in the past year, only 44 percent of businesses reported having established emergency plans for natural disasters. Just over half said they would need outside financing to recover any business losses, with 31 percent saying they would seek a bank loan.
Remember: Growing your business is an exciting experience, but it doesn’t come without risk. If you want to grow strong, you’ll need to grow smart. Get started with Dun & Bradstreet’s guide to managing business risk.
*The PCA Index is a quarterly indicator produced by the Graziadio Business School with the support of Dun & Bradstreet. The Q4 2017 Index report was derived from 1,341 completed responses collected between October 31 and November 15, 2017.