Growth is exciting! More customers, more revenue, a larger team, a new location, more products or services, or the opportunity to take on bigger contracts or enter a new market could be the key to lasting success.

But growth isn’t simply about doing more. The right kind of growth should make your business stronger, not just bigger.

Before you hire, expand, purchase equipment, sign a lease, take on a major contract or invest in a new market, take some time to look at whether your business is ready for the next step.

You don’t need to have every answer figured out before you grow. But asking the right questions can help you identify opportunities, uncover potential challenges and make a more informed plan.

Here are five questions to ask before you start growing your small business.

1. Is There Enough Demand for My Growth Plans?

It can be tempting to assume that more capacity will automatically lead to more sales.

But before you invest in growth, ask yourself a simple question: Who is going to buy what I’m planning to offer, and how do I know?

Growth should be based on more than optimism. Look for evidence that customers want what you’re planning to sell and that the opportunity is large enough to support the investment you’re considering.

Depending on your business, that could mean looking at:

• Recent sales trends
• Customer inquiries and requests
• Repeat customers
• Wait lists or backlogs
• Changes in customer buying habits
• Competitor activity
• Market size and trends
• Demand in a new geographic area
• Opportunities with new customer groups
• Potential government, corporate or other contracts

You don’t necessarily need a complicated market research project. Start with the information you already have.

For example, if customers are consistently asking for a service you don’t currently offer, that could be evidence of demand. If you’re considering opening a second location, look at whether your existing customer base supports the move and whether there is a viable market in the new location.

If you’re thinking about adding employees because you’re overwhelmed with work, consider whether the increased demand is consistent enough to support the ongoing cost of another employee.

Don’t confuse a busy period with sustainable demand.

A temporary spike in sales can be a great opportunity, but it doesn’t necessarily mean your business is ready for a permanent increase in expenses.

Ask: Is this demand temporary, seasonal or something I expect to continue?

The answer can affect whether you need a permanent investment, a temporary solution or a different growth strategy.

Before you grow, make sure you understand the opportunity.

Growth doesn’t have to mean pursuing every opportunity that comes your way. The strongest opportunities are the ones that fit your business, your customers and your goals.

Try this: Write down the specific evidence you have that customers want your proposed product, service or expansion. Then identify what you still need to learn.

2. Do I Have the People and Systems to Support Growth?

More sales can expose weaknesses that weren’t obvious when your business was smaller.

Maybe you’re still handling scheduling, invoicing and customer service yourself. Maybe you have a small team that relies heavily on informal communication. Maybe one person knows how to do a critical task, and no one else has been trained to do it.

That may work when you’re serving 20 customers, but it can become a problem when you’re serving 200.

Before you grow, take a look at whether your people, processes and systems can handle the additional workload.

Consider:

• Who will do the additional work?
• Do current employees have enough capacity?
• Will you need to hire?
• Do employees need additional training?
• Are responsibilities clearly defined?
• Can someone else step in if a key employee is unavailable?
• Are important processes documented?
• Can your technology handle additional customers, transactions or employees?
• Are you still relying on spreadsheets or manual processes that may not scale?
• What will happen to customer service as your volume increases?

Growth often requires infrastructure before it requires more sales.

For example, a business might have enough demand to double its sales but lack the systems to fulfill twice as many orders.

Hiring can help, but adding people isn’t always the first answer. You may also need better scheduling, inventory management, accounting systems, customer relationship management, project management or internal communication.

Look for the bottleneck. What part of the business would break first if sales doubled? That’s often where your next investment should begin.

Don’t forget yourself.

Small business owners sometimes plan for additional employees, equipment and customers without considering their own capacity. If every new customer creates more work for you personally, growth can quickly become unsustainable.

Ask whether your role needs to change as the business grows. You may need to spend less time doing every task yourself and more time managing people, building relationships, developing strategy or overseeing operations.

Try this: Imagine your business is 50% larger six months from now. List everything that would have to change for the business to operate smoothly at that size.

3. What Will Growth Really Cost?

Growth usually requires investment. That investment may be obvious, such as purchasing equipment or leasing additional space. But some of the biggest costs can be less visible. Before moving forward, build a realistic picture of the total cost of growth, not just the price of the most obvious purchase.

Depending on your plans, costs could include:

• New employees and payroll taxes
• Recruiting and training
• Equipment
• Inventory
• Real estate or additional rent
• Renovations or improvements
• Technology and software
• Professional services
• Insurance
• Marketing and advertising
• Transportation and delivery
• Licensing or permitting
• Additional administrative costs
• Financing costs
• Increased inventory or accounts receivable
• Working capital to cover the period before new revenue arrives

It’s also worth considering the cost of getting the growth wrong.

What happens if sales take longer than expected? What if a new location takes six months instead of three to reach your target? What if equipment costs more than anticipated? What if a major customer pays more slowly than expected?

Build more than one scenario.

A simple growth budget can be useful, but consider creating at least three scenarios:

Expected: What happens if things go roughly according to plan?

Conservative: What happens if sales grow more slowly than expected?

Stretch: What happens if demand is stronger than expected and you need to scale faster?

This exercise can reveal whether your plan has enough flexibility. For example, if your business can only afford the expansion if everything goes perfectly, you may need to rethink the timing, reduce the initial investment or identify additional financing before moving forward.

Growth should have a purpose.

Don’t invest simply because “bigger” sounds better, instead ask what the investment is expected to accomplish.

Will it increase revenue? Improve margins? Reduce costs? Increase capacity? Help you serve a new market? Make the business less dependent on the owner? Create a new source of recurring revenue?

The clearer the purpose, the easier it is to measure whether the investment is working.

Try this: Write down your expected investment, ongoing costs and expected financial benefit. Then identify what would have to happen for the investment to make sense.

4. Do I Have Enough Working Capital?

This question deserves special attention because a growing business can run into a cash-flow problem even when sales are increasing.

Working capital is the money a business needs to fund its day-to-day operations. When you’re growing, you may need to spend money before you receive the revenue associated with that growth.

For example, you may need to:

• Purchase additional inventory before customers pay you
• Hire employees before new revenue arrives
• Purchase equipment before it begins generating revenue
• Pay contractors or suppliers sooner than customers pay you
• Carry additional accounts receivable
• Cover higher rent, utilities or other operating expenses
• Finance a larger volume of work

That creates a timing issue and money may be going out faster than it’s coming in. This is one reason a business can have strong sales and still feel short on cash.

Look beyond your current bank balance.

Before you grow, consider creating a cash-flow projection that shows when you expect money to come in and when expenses will need to be paid.

Ask:

• How much cash does the business have available?
• How much cash do I need to keep operating?
• When will customers pay?
• When will suppliers and other bills need to be paid?
• What new expenses will growth create?
• How much cash will I need before the additional revenue arrives?
• What happens if customers pay more slowly than expected?
• Do I have a reserve for unexpected expenses?

A growth plan that looks profitable on paper may still create a cash crunch if the timing isn’t right.

Know your financing options before you need them.

If growth will require outside financing, start exploring options early. Depending on your business and the project, possibilities may include a commercial loan, line of credit, equipment financing, equity investment or other financing tools.

The Virginia Small Business Financing Authority (VSBFA), the financing arm of SBSD, offers a range of programs designed to help eligible businesses access capital for growth, expansion, equipment, working capital and other needs. Some programs work directly with businesses, while others support commercial lenders.

That doesn’t mean a particular program will be the right fit for your business. It does mean that understanding your options before you need the money can give you more time to prepare and make informed decisions.

Try this: Create a simple 12-month cash-flow projection for your growth plan. If the numbers show a period when cash could get tight, address that gap before committing to the expansion.

5. What Support Do I Need Before I Make the Next Move?

You don’t need to become an expert in everything before you grow, but you should know where your knowledge gaps are.

Maybe you understand your customers and industry extremely well but need help interpreting your financial statements. Maybe you know exactly how to sell your product but have never hired employees. Maybe you’re ready to pursue government contracts but don’t know how to navigate procurement. Or perhaps you have a strong growth opportunity but need help thinking through financing.

Knowing when to bring in outside expertise is part of being ready to grow.

Consider the areas where you may need support:

Business strategy

An experienced business counselor or advisor can help you think through your goals, market opportunity, business model and growth strategy.

Financial planning

An accountant, financial professional, lender or business counselor can help you better understand your financial position, projections and financing needs.

Financing

Your lender and VSBFA can help you explore financing resources that may be appropriate for your situation. VSBFA offers direct financing as well as programs that support commercial lending.

Workforce

If growth means hiring, make sure you understand your responsibilities as an employer and have a plan for recruiting, onboarding and managing employees.

Government contracting

If your growth strategy includes selling to government agencies, organizations such as Virginia APEX Accelerator can help you better understand government contracting and procurement.

Marketing and sales

Growth depends on more than having a good product. You need a way to consistently reach the customers who need it and convert opportunities into sales.

Operations and technology

If your current processes are already stretched, additional customers can magnify the problem. An outside perspective can help you identify where better systems or processes may be needed.

You don’t have to figure out the right expert by yourself.

Virginia has a network of organizations that support small businesses at different stages of their journey.

SBSD’s Business Development and Outreach Services (BDOS) provides business education, training, events and one-on-one counseling through Business Service Managers across the Commonwealth. BDOS also connects entrepreneurs and small businesses with resources that can help them address specific challenges.

Business One Stop provides online information and resources for businesses planning, developing and expanding in Virginia, including connections to counseling and assistance.

SBSD also offers resources such as the Virginia Handbook for Success, a guide designed to help entrepreneurs and small businesses find guidance and opportunities to start and grow.

Try this: Make a list of the three areas where you feel least confident about your growth plan. Those are good places to start looking for advice or professional support.

Growth Is a Decision, Not Just a Goal

Growing your business can open the door to new customers, new opportunities, greater revenue and a stronger future, but growth isn’t automatically good simply because the numbers are going up. The right growth strategy should fit your customers, your finances, your team and your long-term goals.

Before you make your next move, ask yourself:

1. Is there enough demand for my growth plans?

Look for evidence that customers want what you’re planning to offer.

2. Do I have the people and systems to support growth?

Make sure your team, processes and technology can handle increased demand.

3. What will growth really cost?

Look beyond the obvious investment and account for ongoing expenses and unexpected challenges.

4. Do I have enough working capital?

Understand when money will go out, when it will come in and what happens if the timing changes.

5. What support do I need before I make the next move?

Identify your knowledge gaps and find the people, organizations and expertise that can help.

You don’t have to answer every question perfectly, but the goal is to ask the questions before you’re committed to the expense.

Ready to Grow? Start With Your Next Step.

If you’re thinking about growing your Virginia small business, you don’t have to develop the plan alone.

SBSD’s Business Development and Outreach Services offers free business education, workshops, networking opportunities and one-on-one counseling to help Virginia entrepreneurs and small businesses build knowledge, strengthen their businesses and prepare for what’s next.

Whether you need help thinking through your growth strategy, understanding your financial needs, finding training or connecting with another resource, SBSD can help you identify a place to start.

Take a closer look at your growth plans, ask the questions, find the right support, and then make your next move with confidence.