Small Business Growth – 3 Indicators That Are Ready For The Next Step

According to a new ANZ survey, Australian small business owners say the top three hurdles they successfully overcome in the first few years of operation are: Disrupted cash flow; Lack of growth opportunities.

Let’s pause for a moment on this last point. Entrepreneurs often say that times of great upheaval, such as a global pandemic, lead to great opportunities for innovation. So is the problem really a lack of opportunity, or do we know when and how to strike?

In our survey, nearly 1 in 5 Australian small business owners cite ‘not knowing how to take the next step’ as the main barrier affecting business growth.

But we know how valuable SMEs are to the Australian economy – they represent over 97% of all Australian businesses and 32% of Australia’s total GDP – the next generation of small business thinkers , doers, and entrepreneurs with the right tools to focus on growth. So here are three metrics that are ready to take the next step.

1. You have a clear picture of your current financial situation

Having a good grasp of the finances of your business, good financial practices and proper systems is very important. An up-to-date balance sheet can help you identify whether you’re making enough money to pay your future expenses, whether your business is growing or declining, and more. The income statement is a valuable forecasting tool for identifying cost-saving opportunities and areas of investment. Finally, the cash flow statement helps you forecast costs, identify trends, and plan for the future.

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As a small business owner, take your time and think strategically to make sure you’re headed in the right direction. This starts with analyzing and articulating your current position. Have you done a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats)? Do you have a marketing plan? And do you have a good grasp of the external factors impacting your business?

Then set specific goals and timeframes to decide what you want your business to look like. For example, say your current market share is 10% and your profit margin is 34%. Within three years, you may decide to grow your market share to 20% and your gross margin to 40%.

3. Ready to take on debt

Whether growth for you means opening new facilities, acquiring freehold or upgrading equipment, you’ll probably need capital for it. More money for your business. If you decide you need to visit, you can save valuable time by going one step further and knowing what potential lenders are looking for in a loan application.

ANZ explains the 4 C’s of credit.

• character – Your business acumen, reputation, credit history, and debt repayment track record.
• capacity – Your ability to pay off debt.
• collateral – Any item or asset of value used to secure a loan, typically cash, real estate, land, accounts receivable.
• capital – The lender looks at the borrower’s capital as part of confirming the assets available to the borrower if needed to help repay the loan.

When applying for a loan, it is important to be informed, prepared, and in good standing.

Helping Australian small business owners be financially prepared for the ups and downs of their business means ensuring they are ready today, but importantly tomorrow. It’s about being ready and being able to identify and take advantage of opportunities when they arise.