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Taking the next business steps

We speak to Craig Nester, joint owner of Habitat Landscapes, to find out what a small business/one-man-band needs to consider before making those all-important steps towards expansion.

When expanding as a business, what are some key things to keep in mind?

Slow and steady wins the race! Too often you see businesses try to move from a small to a large-scale operation too quickly and most of the time, sadly, this results in a quick downwards spiral.

Yearly, we set a target and have a goal to meet and we don’t try to exceed that. We watch our growth and monitor the finances to ensure the growth is good for the business. You have to be prepared for growth as it can be a real risk for a business. Slower expansion, in my opinion, is always a safer way forward! 

Is it wise to expand services early on or should you instead build on what you do already?

 I think if you have the ability to expand and the demand then it shouldn’t matter when you expand. It’s more a question of being prepared for it and expanding in a controlled and planned way rather than rushing into it! 

What are the different ways you can pay yourself as a business owner and what are the pros and cons?

As well as a salary a business owner can benefit from the company paying for expenses such as vehicle, fuel, phone costs, insurances, entertainment (relating to the business). Drawing dividend is also a good benefit for any business owner with a lower rate of tax implications. 

Personally, I have always taken a modest salary and rationalised the drawing with the perks of having my expenses (phone, vehicle, insurance) covered by the business. I also take a reasonable dividend at the end of our tax year if the business is looking healthy and the business can afford to allow me. 

Be wary though! A lot of business owners will make up a large portion of their income from dividends and draw large amounts from the business into their personal accounts. This comes with some negatives.

If the business is new and still growing, large drawings can massively reduce available cash in the business should something go wrong. It can also affect how your business is viewed by others – lenders, potential clients, or potential buyers who may look to view records of your yearly accounts.

My advice here for anyone growing their business is to only take what you can afford to and consider what investment you need to grow the following year ahead of what you might like to draw personally. 

What would you say is the biggest challenge when expanding?

I would say the three biggest challenges for us when expanding would be staff, funds, and marketing.

Too often you see businesses try to move from a small to a large-scale operation too quickly and most of the time, sadly, this results in a quick downwards spiral.

Staff

Good quality, fully trained staff that know how you work are essential. If you don’t have the right additional staff to handle the potential increase in your output the don’t expand. Good quality staff numbers that can handle your expected demand is the first basic requirement to ensure you continue to meet your clients’ expectations. Without the correct number and quality of staff for any planned expansion you will not be successful.

Funds

You need to have some reserve funds to invest in new equipment, training and any unforeseen cost that may be required. It’s all good to have great cash flow but you also need to have cash in the bank to have real security when expanding.

Marketing

A wise man (Ken White) once said to me: “you can’t have a business without marketing,” and boy was he right! Even when demand is there in the initial stages of expansion, you need to look beyond the now and into the future. You need to ensure any expansion you make can be sustainable beyond a few months. An investment into the correct type of marketing for your business alongside an expansion can really ensure that the demand you may have at the time continues long into the expansion period.

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