Business Lifecycle

Growing pains: Going from a microbusiness to a small- to medium-sized business

Learn how to sustain the growth of your business with effective planning, financing, and marketing.

Published: July 21, 2014
Updated: February 07, 2017

Almost every business at one point is considered a "microbusiness" — or one with fewer than 10 employees. In fact, Zane Benefits shares that about 82% of U.S. firms are classified as microbusinesses, as of 2015.

If your microbusiness is growing and making the transition to becoming a small- to medium-sized business, consider these strategies to help tackle the potential growing pains that come along with this transition.

Revisit your business plan

When your business experiences a surge of revenue growth or product demand, it's important to adjust your business plan accordingly. Ask yourself:

  • Who are my customers? A survey could reveal if your customers have changed since you first started your business. 

  • What are my expansion opportunities? Perhaps you could expand into a larger space, or second location. You might even consider another location in a new town or city.

  • What do I need to get there? For example, you might need to hire more employees or outsource services to another company to meet current and future demands.

Once you answer these questions, revise your business plan to accommodate your new goals.

"Being willing, even eager, to embrace and adapt to change is a serious competitive edge for any entrepreneur," says Michael Chodos, Senior Fellow at the Beeck Center for Social Impact & Innovation at Georgetown University. "Welcoming trend shifts, positioning yourself to stay on top of them, and striving to remain ahead of your competition are all functions of such readiness to change."

Assess your competition

"A key step in planning is to benchmark your microbusiness against competitors," Chodos says. Now that your business is on the upswing, ask yourself how your labor costs compare to similar businesses. Consider whether you should hire more employees to shoulder the new growth of your business. The Competitive Intelligence Tool, as well as SBA counseling partners from SCOREWoman's Business Centers (WBCs), and Small Business Development Centers (SBDCs), can bring these questions into focus, Chodos says. "Knowledge is power when it comes to growing your business."

Consider financing for sustainability

There are different financing needs at each stage of business growth. Many microbusinesses begin with financing from family and friends. But now that your business is making additional sales, you may need additional financing for inventory and hiring. In this case, you may want to consider taking out a business loan or line of credit from a bank.

Upgrade your business structure

As a business grows, Chodos says, its business entity might change, as well. A microbusiness might begin as a sole proprietorship but later become a corporate entity.

When bringing in new employees, Chodos says, it's important to understand how that may affect payroll taxes or whether new regulations might apply. Take care to understand how tax and investment laws affect your business at each stage of growth. For instance, the earnings in a partnership or sole proprietorship are subject to different taxation rules than earnings of a corporation.

Also, if you plan on bringing in investors to help fund your growth, you'll need to understand the different rules about taking on a partner compared with giving shares to a new shareholder-investor. SBA's vast network of counselors and advisors can help guide you through these choices.

Adjust your marketing plan

Along with reviewing all of these aspects of your business, consider an effective online marketing strategy to accommodate your growing customer base. Online marketing campaigns "can be a huge boon to a small business that can't afford more traditional advertising," Chodos says. In addition, a strong online presence can help increase customer loyalty and retention. If you're unfamiliar with online marketing, enlist an expert to ensure messaging reaches customers, Chodos says. "You need to learn how to use today's tools effectively."

Experiencing growth in your business can be very exciting, but it's important to plan for how you're going to sustain it. "Circumstances change rapidly in a small business environment," Chodos says, "and it's imperative to adapt appropriately."