What to Ask Before Opening a Second Location

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Photo by Venveo on UnsplashIn the business world, growth can take multiple forms. Your company can begin to offer a different product or service, one that is similar to, yet distinct from, your initial product or service. You can increase income and revenue by increasing the amount you charge for your services or products. Or, you can open an additional location, potentially expanding into a new, untapped market. If you are considering opening a second location of your business, here are a few questions that are worth asking first.

Why Are You Expanding?

It’s worth taking a close look at your goals for expansion and it’s worth understanding why you want to open an additional location. It could be that your first location is regularly full of customers or your appointments are usually completely booked. If that’s the case, opening a new location would give you the space to accommodate more customers at once and would allow you to meet demand.

Another reason businesses decide to expand is to reach a new market. Your first location might serve a particular demographic or customer base, but might be inaccessible or too much of a hassle for another group of people to reach. Adding an additional branch or location might better enable you to connect with a currently unserved or underserved market.

How Is Your First Location Doing?

Often, when a business opens its second space, the first location needs to do the heavy lifting while the second location finds its bearings. It’s worth taking a look at how your current space is doing before you decide to expand. Ideally, it will be earning a profit each month and will have a relatively stable and steady stream of revenue.

It’s also worth considering whether opening a second location will take away from or otherwise impact the first location. Will some of your customers visit the second branch once it’s open, potentially leading to a drop in revenue for the first one? If so, can you estimate how much of a loss in revenue the first location experience and whether that loss will be substantial enough to affect your business?

Where Will Your Second Location Be?

It’s also worth considering the location of your new branch, store or office. Knowing your goals for the expansion will help you determine the ideal place for opening your second space. You’ll also want to think about the market at that second location. Is it full of companies like yours or is there a gap in the market? If the market is saturated, why do you think your business would do well in the new area? It could be that you’ve had numerous customers tell you they live over there and are willing to travel for what your business has to offer, for example.

Who Will Be at the Second Location?

Ideally, when people walk into the new location, their experience will be identical to (or as close as possible) their experience walking into your primary location. For that reason, it’s important to think about who will staff your new space. Will you have some of your current employees transfer over to the second space or do you plan on hiring from the ground up? Hiring a new team can present some challenges, as you’ll need to spend additional time training that team so that they are capable of and willing to provide an experience to your customers that’s what people at your first location have come to expect.

How Will You Finance the New Location?

What mix of financing will you use to pay for the expansion? Do you see your company taking on debt to open a new branch or office or do you have investors on board who think expansion is a good idea and who are willing to pay for it? It might be that your business has earned enough profit to cover the cost of expansion on your own, without seeking outside financing.

Whether you are unsure about financing or have other questions about opening a new location, the team at New Direction Capital is here to help. Our virtual CFO services can help you determine whether a new location will your business grow and meet its goals. To learn more, contact us today.

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06 Sep 2018

4 Ways to Grow a Business

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Photo by rawpixel on UnsplashBusiness growth isn’t something that just happens to a company. It’s typically the result of careful planning and strategy. One challenge many business owners face is that they aren’t sure what to do or how to grow their companies. If you feel that your business is ready to take the next step or move to the next level, there are multiple ways to do so. Often, growing a business means moving into a new market or finding new ways to connect with your customers. Here are a few options.

Expand or Update Your Existing Products

One way to grow a business is to keep reinventing the wheel, as it were. If you make one thing, you’ll eventually get to the point where you have saturated the market and everyone who is going to buy it will have purchased it. But if you offer a new, improved product, the same people who already bought the first version might be likely to come back and buy the new one.

Technology companies are particularly good at getting people to buy new products, as they tend to introduce updated products on a fairly consistent basis. The introduction of the latest smartphone often encourages people to upgrade their phones, even if the current model they have still works perfectly well.

When expanding or updating a product, it’s important to remember to make it better in some way. You don’t want to offer the same thing in different packaging. For example, a new smartphone needs to have features that older models won’t have. New car models need to have enhanced safety features or standard features that people used to have to pay extra to obtain.

Offer New Products

Along with or instead of updating your current products, you can think of ways to introduce new, related products to the market. Google is a good example of a company that keeps on growing regularly introducing new products. It started out as a search engine, then added email a few years later. Today, it offers a full range of products, including hardware such as smart speakers and tablets.

The new products your company offers don’t necessarily have to be in the same category as your existing products. One way to decide what to make is to look at the problems your customers are facing, then develop a product that seeks to solve those problems.

Reach Out to New Customers

Another way to grow is to find new people to sell your products or services to. You might not need to change much about your existing services or products to do so, you might only need to change how you market them. Take a look at your core product and think about who could benefit from using it (who isn’t already doing so). For example, in addition to the email and cloud services it offers to the general public, Google has a version designed specifically for businesses. The people at the companies who use G Suite might have been using it in their personal lives, and Google found a way to reach them in the workplace.

Change How You Sell Products

You can also grow your business by changing your revenue stream. For example, instead of selling a product once, you can try a subscription model, which has people pay for the service or product over and over. Twenty years ago, people who wanted to watch a movie at home headed out to a video store and picked up a rental for the night. They paid for the rental at the time, then paid fees if they didn’t bring it back in time. Netflix changed that by charging people a monthly fee for rentals. Instead of only paying when they have a movie at home, people paid the same amount month after month, no matter how many movies they ended up watching. It created a continuous stream of revenue for the company, compared to relying on piecemeal rental charges.

How you decide to grow your business ultimately depends on what your goals are and the direction you want to take your company. If you are looking for assistance in finding the best way to grow your company, New Direction Capital can help. Contact us today to learn more.

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Photo by rawpixel on UnsplashAs of July 2018, the unemployment rate in the US was 3.9 percent, according to the Bureau of Labor Statistics. The unemployment rate isn’t just lower than it was during the time of the recession, it’s lower than its ever been before. That can be great news for people looking for work, as there are now more open positions than job seekers.

It’s a slightly different story for business owners or hiring managers. Now, instead of dealing with a sea of qualified, or in some cases, over-qualified, applicants, you might find that there are slim pickings. Worse, you might interview an ideal candidate for the job, only to have them hired out from under you by a competitor. When the job market is tough for employers, there are things you can do to increase the likelihood of finding your dream hire.

Expand Your Search

When there are more job candidates than jobs, a company can afford to be a bit pickier when it comes to the requirements or skill sets it expects an employee to have. The situation is reversed when there are more jobs than candidates. You might have to loosen your requirements slightly. That isn’t necessarily a bad thing, as it can lead you to a candidate who’s a good fit for the job who you might not have otherwise considered.

One way to expand your search is to attempt to recruit candidates who might not have the technical skills or knowledge needed for the job but who do have the interpersonal skills or attitude you’re looking for in an employee. You can usually train a person to use a computer program or help someone develop tech skills, but it’s more difficult to change a person’s attitude.

Another way to expand your search for the right candidate is to broaden your horizons when it comes to advertising the open position. Online job boards are a great option, but they shouldn’t be the only way you look for employees. You can ask your current team for referrals, post the opening on your company’s social media pages, or include a notice about open positions in the communications you send to your customers.

Focus on What Makes Your Company Great

When there are many candidates for one job, it’s common for people to focus on how they’re a good match for a business. The tables typically turn when there are many jobs for a single candidate. It’s a good idea to focus on what sets your company apart from other businesses that are hiring. You can highlight your company’s culture, the benefits you offer or what makes your current team happy to work for you.

Offer Competitive Salaries and Benefits

You’ll attract more qualified candidates if you’re offering a salary that’s commensurate with the amount of experience you expect from them and with the amount of commitment you expect. The same is true of benefits. You don’t want to be the only company hiring engineers that doesn’t offer health insurance, for example, nor do you want to offer salaries that are well below the market rate. Do some research to find out what the typical salaries in your area are for the type of position you’re hiring. You can look at the Bureau of Labor Statistics for salary data or at self-reported resources such as Glassdoor or Payscale.

Move Quickly

Candidates don’t stay on the job market long when there’s fewer of them. While you might have been able to move more slowly when the market was better, in a tight job market, the sooner you make someone an offer, the better. Otherwise, you risk having that person get an offer from another company and choose that one rather than coming to work for you. If that happens, you need to start the search and interview process over again, which can add up in terms of time and money. If you do need more time to make a hiring decision, keep the candidates you’re interested in in-the-loop by giving them an update after a few days or a week.

New Direction Capital can help your business save time and money when looking to hire new employees. To learn more about our virtual CFO services, contact us today.

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Photo by rawpixel on UnsplashThe chief financial officer at a company is usually responsible for the reporting of financial information, for understanding the business’ financial condition and for developing a strategy to help a company grow and succeed. A CFO is an executive-level position and usually comes with an executive-level salary and benefits package.  While there’s little argument that a CFO provides value to a company, many businesses don’t have the budget to hire a full-time CFO or might not need the full-time services of a CFO.

What are companies that aren’t quite ready for a full-time CFO to do? One option is to work with a fractional CFO, also known as a part-time or outsourced CFO. When a business only needs the support of a CFO some of the time, working with a fractional CFO can be the best option.

What a Fractional CFO Does

The word “fractional” suggests that a fractional CFO only works with a business for a fraction of the time. How frequently a company works with a part-time CFO depends in large part on its needs. It might be the case that a company brings on a fractional CFO around tax-time or when it is reviewing its business plan. In some cases, companies might work with a fractional CFO when they are mapping out a plan for growth and want advice on the best ways to obtain financing or when they are considering selling all or part of the business and want feedback on the value of their company.

The Benefits of a Fractional CFO vs. Full-Time CFO

One of the most significant benefits of working with a fractional CFO rather than a full-time CFO is the cost. When a company partners with a fractional CFO, it is only working with the person as needed. Depending on the fee structure of the CFO, the company might pay a flat fee for a certain amount of service or might pay by the hour. In contrast, a full-time CFO usually expects to receive an annual salary, as well as other perks that go along with full-time employment, such as retirement, health insurance and paid time off.

Another benefit of working with a fractional CFO, particularly for newer or smaller businesses, is that they are able to work with a person who has many years of experience in the industry. When newer companies are looking to hire full-time positions, the CFOs who might align with their salary requirements might not align with the level of experience the company needs. Fractional CFOs typically work with more than one company at once, as they are contractors who maintain a roster of clients. They bring years of experience and a high level of expertise to the table without the high cost of a full-time employee.

When to Hire a Fractional CFO

The best time to hire a fractional CFO is when your company needs financial guidance or assistance in planning its next steps but doesn’t want to or is unable to hire someone full-time. For example, a fractional CFO can help your business develop or adjust its strategy and business plan for growth. If your company has reached a point where it needs to make an important decision about what to do next, it might be time to hire a part-time CFO. Another time when it is appropriate to hire a fractional CFO is when your company is looking for new sources of financing or when it needs help determining what mix of financing will best help it reach its goals.

What to Look for in a Fractional CFO

One of the most important things to look for in a fractional CFO is an interest in your company and a desire to establish a relationship with your business. When people only work together on a part-time basis, it can be easy to give those part-time commitments less of a focus. You want a CFO is going to be fully invested in your business and fully interested in establishing a rapport with you. A fractional CFO who’s interested in what makes your company tick and who’s interested in developing a sustained relationship with you is going to be more likely to deliver the care and attention you need to achieve your goals.

New Direction Capital provides fractional CFO services to companies. To learn more about what we do and how we can help your business, contact us today.

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Photo by rawpixel on UnsplashAlthough you might assume that the only time you need to know your business’ value or worth is right before you list the company for sale, having an understanding of what it can be worth can help you map out a plan for your company and shape its future. There are multiple variables you can use to get an idea of the worth of your business.

Look at Your Business’ Assets (and Liabilities)

One way to get a sense of the worth of a business is to examine the value of its assets. Business assets include the property the company owns, any equipment it owns, and its inventory. These are all items a business owner would have to purchase separately if they were starting a company from the ground up.  It’s a good idea to compile a list of your company’s assets, including their current value and the amount your company purchased them for.

On the flip side, it is also important to examine the amount of debt or the number of liabilities your company has. Liabilities detract from the overall value of a business, as they are things that would need to be paid back by a new owner or by you if you continue to own the company.

Look at Your Business’ Earnings

Understanding the profitability of your company allows you to put together a plan for growth (or lets you see if growth is a possibility for your business). Evaluating your company’s earnings can get a bit technical, and it might be worth working with a virtual chief financial officer at this stage to help you put together financial statements and to help you get a clear idea of the worth of your business.

One thing to examine when looking at your company’s earnings is its earnings before interest on debt, taxes, depreciation, or amortization, aka EBITDA. EBITDA can help to level the playing field and give you a full understanding of what your company is bringing in it each month. For example, Company A might earn a gross income of $1,500 per month, have no debt and pay $250 in taxes. Its net income would then be $1,250 and its EBITDA is $1,500. Meanwhile, Company B earns the same amount each month ($1,500), pays $150 in taxes and pays $150 in interest monthly. Its net income is $1,200 and its EBITDA is $1,500. Comparing the two the EBITDA of the two companies, Company B is similar to Company A, at least in terms of actual cash brought in.

Weigh Your Business’ Potential for Growth and Risk

Another thing to consider when determining the worth of your business is its potential for growth and the general riskiness of its industry. Generally speaking, a business that has hit its peak and has nowhere else to go or limited opportunities for future growth might not be worth as much as a business that has less limited growth potential.

Usually, the riskier your business, the lower its overall worth. A buyer purchasing a risky business understands that there might be some possibility of the company bringing in a lot of money. But there’s also the understanding that it’s more likely that the business won’t turn a profit or that various factors can disrupt its earnings, meaning that buyers are going to be less likely to want to shell out a considerable amount up front for a business that might end up losing money in the long run.

Compare Your Business to Similar Companies

In real estate, it’s common practice for buyers and sellers to look at the selling price of similar properties in an area during a specific period. Known as comps, this information can influence how much a seller asks for a property and how much a buyer offers on the property.  You can do something similar with your company to get an idea of its value or worth. Take a look at what businesses like yours have sold for recently. While there are a lot of variables that go into comparing business’ worth, doing it can give you a general idea of what people are willing to pay for a company like yours.

Knowing the value of your business can help you plan out a path for growth or map out the future of your company.  New Direction Capital can work with you to help you get a better understanding of your company’s value and what it means for you now and in the future. Contact us today to learn more.

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