Most business owners want to build companies that will become their life’s work—perhaps even a legacy they can pass down to their children. Unlike the get-rich-quick entrepreneurial image often portrayed on television, the idea of starting a business, scaling it, and selling it, only to walk away after a few years, is a foreign concept to many small business owners.
Building a long-term business in a short-term world can be a challenge that requires you to look at your company from a different paradigm. If you want to build a lasting, sustainable long-term business, here are three suggestions:
Focus on Manageable Growth
Growth can be expensive. So, thinking long-term requires a business owner to ask some pretty important questions: “How much does my business need to grow to stay competitive?” and “How much growth is too much, in that it might dilute the quality of my product or service, or cause me to act contrary to my business mission?”
It can be challenging to forecast the amount of growth required to keep your business competitive and relevant in the marketplace. Nonetheless, it’s important for you to consider these questions. Then you can set expectations that are aligned with your goals. It’s easy to start chasing short-term growth at the expense of long-term viability. Choosing short-term growth over profitability should be a conscious decision you make—not the result of an adrenaline rush.
For some strategies to help grow your business, you can check out this article.
Remember, Investors want ROI
There are two ways to approach capitalizing a business. One way is to pursue investment from outside and the other is to borrow to fuel growth from lenders such as OnDeck. The method you choose can impact subsequent decisions. Investors are looking down the road at a capital event where they will reap their profits. A lender profits from your regular and timely periodic payments.
There are many companies today that choose to forego profits to rapidly grow. But, the expense associated with hyper-growth still requires money to make it happen. That cash, in most cases, needs to come from someplace other than profits. Investors look for companies with the potential to exponentially grow with an infusion of capital. Unlike a loan with periodic payments, an investor is likely willing to give a business a few years to grow. Only then will they look to capture their profits from investing in your business. Depending upon the level of their investment, they’ll also likely want a seat at the decision-making table. This way they can make sure your focus is on growth, an exit and big profits with a liquidity event like a sale or public offering.
There’s nothing wrong with this approach. It’s built good businesses and made more than a few entrepreneurs very wealthy over the years. What’s more, it might be tempting if you’ve got big ideas that require a lot of capital. It can even be a good idea if you need to grow quickly in order to remain viable and relevant. Nevertheless, there are also options beyond investor capital to fuel manageable long-term business growth.
With borrowed capital, the relationship your business has with a lender is straightforward. It’s based upon how well you’re able to make periodic loan payments. Additionally, you won’t be required to give up ownership equity to an investor whose goals and objectives may differ from yours. If you are looking into using borrowed capital, it’s a good idea to ensure your credit score and profile are strong. A great way to check your business credit score is with a free online credit check.
OnDeck offers small business loans up to $250,000. If you’d like to learn more about our product, or apply for a loan, you can do so here.
Consider the Long-Term Consequences of the Decisions You Make Today
There’s a difference between making decisions you know you’re going to have to live with five, 10 or 20 years down the road. It can be tempting to make decisions today that might carry negative consequences in the future. This can be especially so if you know you’re likely not going to have to deal with them. Putting off solving a future issue by kicking the proverbial can down the road may help increase short-term profits. Regardless, it might negatively impact long-term business sustainability. Taking the time to consider long-term consequences for the decision you make today is an important part of building a long-term business.
Building and sustaining a business for the long term requires business owners to ignore the popular entrepreneurial myths often perpetuated. In other words, a successful business or entrepreneur doesn’t necessarily require a lot of venture capital and an exit. Many highly successful entrepreneurs take the long view and make building their companies their life’s work.