Resources · Business Growth & Strategy
Business Growth & Strategy
Growing on purpose: pricing from margin, hiring from capacity, keeping a reserve, and the handful of decisions that deserve a number before a feeling.
Reading time · 2 min
The short version
- Price from gross margin, not from what the competitor down the road charges.
- Hire when the work is already there and the margin survives the wage.
- Keep one to three months of expenses in reserve, and open a credit line before you need it.
- Every big decision gets a simple forecast first: twelve months, three lines.
The guide
Price from margin
Start with what the work costs to deliver, add the gross margin the business needs to cover overhead and pay you, and that is the price. Raising prices is the fastest lever most small businesses never pull: a 5% increase on 30% margin work raises profit far more than a 5% increase in volume, with no new capacity required.
Capacity, then hiring
A business grows in steps: the owner's hours, the first hire, the first manager. Before each step, know the capacity you have (billable hours, jobs per week, tables per night) and how full it is.
Hire when you are turning work away or working the nights that make you want to quit, and only if the margin on the added work covers the wage, the employer taxes and the training months.
Reserve and credit
One to three months of operating expenses in a business savings account turns a slow month into an inconvenience. A line of credit is easiest to get when you do not need it; get it then, use it for timing gaps, never for losses.
Financing a purchase makes sense when the asset earns more than the payment; financing payroll rarely does.
Forecast before you decide
A useful forecast fits on one page: revenue, expenses and cash by month for the next twelve, in three scenarios if the decision is big. It is not a prediction; it is a way to see whether the new truck, the second location or the extra hire pays for itself, and how many months of cash it costs before it does.
Entity and structure
Most businesses start as a sole proprietorship or an LLC. Once profit passes a level your preparer will name, an S corporation election can reduce self-employment tax in exchange for running payroll and a reasonable owner salary.
Structure follows profit; do not build the structure first.
A monthly meeting with the numbers
Growth decisions go better when they are made against the current month's statement, in a standing meeting, with someone who reads the numbers and asks the questions. That is the controller-level support a growing business can rent long before it can hire it.
The download for this topic
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