For some female entrepreneurs, huge growth can come out of the blue. Although there are different ways to handle it, one thing remains: businesswomen must deal with it. This article examines the way two types of female entrepreneurs might handle huge growth in their business – and the effects their reactions may have.
Growth. It's a word whispered through the lips of female entrepreneurs as they dream about their businesses. But even though you've dreamed of it since you hung out your shingle, are you really ready to handle it when it shows up on your doorstep? Research by Jane Out of the Box, an authority on women entrepreneurs, reveals five distinct types of businesswomen - and five ways they may handle growth. This article details the way two of those "Janes" may handle growth.
Accidental Jane is a successful, confident business owner who never actually set out to start a business. Instead, she may have decided to start a business due to frustration with her job or a layoff and decided to use her business and personal contacts to strike out on her own. Or, she may have started making something that served her own unmet needs and found other customers with the same need, giving birth to a business. Although Accidental Jane may sometimes struggle with prioritizing what she needs to do next in her business, she enjoys what she does and is making good money. About 18% of all women business owners fit the Accidental Jane profile.
Accidental Janes often rely on word of mouth and deep relationships to build their businesses. Massive growth opportunities may catch her off-guard because she's not typically seeking growth, feeling content with where she is today, overall. Therefore, a significant growth spurt might feel overwhelming. It's important to first remember that you do have choices - you don't have to seize every opportunity that comes your way. Consider whether you really want the opportunity, or whether you'd rather you're your business the way it is.
If you decide you desire the growth, remember that you have several factors working in your favor. First, you are a consummate professional - so your new clients/project will undoubtedly be a success. Secondly, you're very well-connected. Reach out to your friends and associates in the business and "share the wealth." Explore ways to partner that get the work done effectively and well, without keeping you busier than you prefer to be. Finally, because your business is generally supporting your financial needs, now may be the ideal time to hire a part-timer to help with some of the tasks you least enjoy, whether that is handling your books, cleaning your house, or doing the filing.
Whether you pursue the opportunity or not, make sure to periodically check in with yourself to make sure you're still happy with what you're doing. One of the most wonderful qualities of Accidental Jane is that she is content, overall, with her business and her life. So make sure massive growth is handled in a way that ensures you maintain your balanced life.
Tenacity Jane is an entrepreneur with an undeniable passion for her business, but who tends to be struggling with cash flow. As a result, she's working long hours, and making less money than she'd like. Nevertheless, Tenacity Jane is bound and determined to make her business a success. At 31% of women in business, Tenacity Janes are the largest single Jane type.
As a Tenacity Jane, huge growth may seem like the ticket to the place you always imagined your business would go. It may be your dream come true - so to take best advantage of it, make sure you create a thorough plan and carefully examine the finances before jumping in with both feet.
Planning and budgeting go hand-in-hand when growing your business. Much of the planning for massive growth has to do with ensuring timelines are reasonable and there is sufficient profit to make the work worth it. Consider this example: You sell a product for $100 that costs you $80 to make and takes 30 minutes per order to customize. You've got sales of $5,000 a week (50 units X $100). You're working on orders 25 hours a week (50 units X 30 minutes) and clearing $1,000 a week (50 units X $20 profit) - for hourly "working time" pay of $40/hour.
A retailer has just called to say they want to order in bulk. They want an additional 100 units a week, and they want you to reduce your cost to $90, which they will mark up to earn their profit. It's thrilling to think about doubling your volume with just one customer - but can you create a financial plan that makes this work?
* You'll need an extra 50 hours a week in product customization. You clearly can't do that yourself, so you plan to hire 2 people at $15/hour for 20 hours per week, each. This is going to cost $600/week. And, you'll do an extra 10 hours a week yourself. Managing the two people on your team will take an additional 5 hours of your time each week. * Your weekly revenue will now be $14,000 ($9,000 from the 100 new units at $90 each, plus your existing customers at $5,000/week) - massive growth! * But your income per hour of your time actually diminishes. You "clear" only $1,400/week (your original orders of $1,000 plus only $400/week on the new customer orders after you pay your team and because the new customer wants you to reduce your rate). Remember, too, you're working an extra 15 hours - so your hourly rate falls to $35/hour. And you're busier than you've ever been.
Another planning consideration is cash flow. When will you pay your two people? When do you pay your vendor(s) who provide the materials for the product you're making? And, importantly, when will you be paid?
Your out of pocket costs for materials to make the product will triple, because you're now making 150 per week instead of 50 units. If you have to front those costs and if you pay your team members weekly, costs will really build up. In a four-week month, you will "front" $50,400 for your business. If your customer is going to pay you on 30-day terms, do you have the $50,400 you will need to keep the business afloat while waiting for the cash to flow in?
This exercise isn't meant to be bleak - it should be empowering! By breaking down the plan and budget, you're now in a position to really negotiate with this customer. All of the following are options:
* Tell the customer you can't sell to them for $90, but you can for $95. (This would boost your hourly rate to $47.50 and clears $1,900/week.) * Tell the customer you can only negotiate on price if he/she pre-pays monthly (ensuring you have cash flow). * Hire a 3rd person at $15/hour to do half of your work. (This will add an additional $300/week in expense, but your hourly rate will increase to $55/hour even under the $90 pricing scenario - and you'll have more time than you do today to find another big customer.)
As you can see, taking the time to plan and budget will ensure that your massive growth doesn't break the bank. Knowing the parameters of profit and loss will help you make smart decisions and give you strength when you negotiate. Take the time to make sure you have a solid understanding of the system that will sustain your growth so your business can thrive.
Whether you're an Accidental Jane or a Tenacity Jane, growth can be a pleasant surprise and a great opportunity to make more of your business. It can be the chance you've been waiting for to achieve the dream you've been dreaming - just make sure you accept on your own terms!
Michele DeKinder-Smith is the founder of Jane out of the Box, an online resource dedicated to the women entrepreneur community. Discover more incredibly useful information for running a small business by taking the FREE Jane Types Assessment at Jane out of the Box. Offering networking and marketing opportunities, key resources and mentorship from successful women in business, Jane Out of the Box is online at www.janeoutofthebox.com