Many businesses are currently confounding market expectations, experiencing large profits in the post-Brexit landscape. How these businesses treat this sudden profit expansion will be vital when securing their long-term future.
If your business is currently experiencing growth, then you have three options:
- Continue as you are
- Invest inwardly in your business’s expansion
- Invest outwardly in other projects to diversify your income
In this post, we’ll discuss the pros and cons of all three strategies.
Continuing as You Are
If you believe that your rapid growth levels may just be a short-term spike, then you may be best to just continue as you are.
As a result, before you invest, consider how long-term you believe this growth will be. If you sell a seasonal product, for example, sun cream, a sharp rise in sales at this time of the year will be expected. But will that growth still be apparent in October/ November? It’s unlikely. So, continuing as you are may be the best bet. You could always take on some short-term staff in the meantime to safeguard yourself and ensure you meet orders. Or, you could consider leveraging freelancers.
On the other hand, if your projections and new business team show you that this growth looks to be long-term, then continuing as you are could be a risky option, leaving you under-staffed and unable to fulfil orders that are rapidly increasing in number. If this is the case, one of the next two options (or a combination of both) is probably best for you.
If your growth looks set to be long-term, you’ll need to expand your business, you can either do this in investing in new premises or new staff members.
If you fail to invest in new staff, it’s more than likely that you’ll burnout your current employees who will seek work elsewhere. Likewise, you’ll soon lose the ability to fulfil orders. As a result, recruiting effectively and quickly is vital.
If your expansion is very rapid, then it’s also worth looking into new premises. This way, you can reinvest a large chunk of your profits into a tangible business asset that can help you improve your market share even further.
If you think that doing the above alone isn’t enough and you want to safeguard your profits in case business takes a downturn, then it could be worth investing outwardly in other ventures.
This can take a number of forms. You can either buy other businesses or you can invest in an entirely different market to diversify your portfolio of interests.
By buying other businesses in complementary sectors, you can also diversify your product offering. For example, if you’re an electrical firm, then buying out a small plumbing firm will add an extra string to your bow. It also means that, should your business take a turn for the worse, you have another income stream to fall back on.
However, this can be risky, so some people look to other markets altogether. This includes anything from buying retail to trading commodities. By investing in another market entirely which has no ties to your business, such as the forex market, you’re diversifying your portfolio in case the market turns against you, leaving you an income stream to fall back on.
However, the downside of this is that you’re likely to be more inexperienced in these markets, which lessens your chance of making good returns and makes the strategy more high risk.
All three of these strategies have positives and negatives, and the best one for you will vary on a business by business case. Take the time to plan carefully, consult your board and management team and plan meticulously. Make the right move and you could secure the future of your business for years to come.