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Home / Special Report / Small Office/Home Office:
To grow or not to grow

Small Office/Home Office:
To grow or not to grow

Mary Malaszek agonized for three months, trying to decide whether to hire her first employee.
Her company, Market Directions, had grown to the point that she was forced to turn away smaller jobs, even if those projects would have led to plum future assignments.
She also was working more than 60 hours a week but still was putting off the financial details of her business. Continuing on that track, she says, would have been disastrous.
Debra Ross could keep up with her present workload, but she also was turning clients away and wanted to expand her firm, Axton Enterprises, into other areas.
These situations illustrate critical junctures for a small business, says John Bell, senior business development officer at Rural Opportunities Inc. Deciding whether to move from a home office into rented space, add an employee or take on a huge project–all are points at which owners need to be cautious and reassess their goals.
Adding an employee can bring on unwanted paperwork and managerial duties, and a large new project might mean working more hours than an owner wants to commit to the business. But more critically, Bell says, the owner might not be able to afford these moves. Instead, she might need to better manage her workload.
For Malaszek, the desire to build her client base was the driving force behind her decision. She could not accomplish that goal without help.
Yet she had to prepare herself for a big change in her business practice. Malaszek had always grown her business on a cash basis–buying equipment or offering more services only when she had the money. To hire an assistant, she had to apply for a loan.
Malaszek’s sales and profits have risen steadily since she started her market-research firm three years ago, but there are still months with little to no income coming in. The small-business loan will serve as a cash reserve for the business.
In addition, she had to buy equipment and supplies for her assistant on credit, adding another line to her monthly expenses.
Eight weeks ago, she hired her assistant, who handles administrative tasks such as sending invoices and paying bills, and also helps out with research. She also hired Paychex Inc. to take care of the employee paperwork.
Malaszek charted her income and expenses over three years’ time in order to recognize her business’s financial pattern. That process is a necessary step in any growth decision, Bell says.
It also is essential to complete a conservative assessment of potential growth,working up solid projections for the next few years, he says. This is especially important for owners applying for expansion loans.
If there are any potential gaps in income flow, as in Malaszek’s case, a loan is a good idea, Bell says. The U.S. Small Business Administration and Rural Opportunities both operate microbusiness loan programs, and several banks are now starting to offer smaller loans to home businesses.
Ross does not need a loan to pay for her expansion. Her biggest hurdle was finding someone with the right fit for the job.
Axton Enterprises sets up computerized mailrooms for companies. Ross travels to companies across the country and helps install both the hardware and software. She then trains employees how to use the system.
“Doing computer training can be really boring,” she says, if the trainer does not have a clear understanding of the clients’ needs and is not enthusiastic about the task at hand.
Ross decided she needed help to meet her clients’ needs and her own personal goals, and took a year’s time to find a partner.
This spring she found someone with whom she feels comfortable working and, more importantly, whom she thinks her clients will like. Since then, the two have been trying to decide what type of professional arrangement they want.
Ross says she is not ready psychologically to hire an employee. She also does not want to be responsible for the government paperwork and regulations that come with employees.
Complicating the situation, her potential business partner lives in Chicago.
The two are consulting a lawyer to see whether it would make more sense to become formal partners or develop a subcontracting arrangement, Ross says. They are weighing tax consequences and procedural details involved in both types of relationships.
When the details are worked out, Ross’ partner will take over most of the installing and training components of the business, she says. Ross, in turn, will do the marketing and administrative functions.
Ross hopes the partnership will allow Axton Enterprises to serve more clients on the mailroom end, while allowing Ross to expand the business into computer programming for corporations.
Marcia Glatt has wanted to expand her business twice over the last few years, first moving to a downtown office from her suburban home and then hiring employees. She even went as far as training two assistants.
Her clients, however, nixed her expansion plans. Glatt, through M. Glatt Associates Inc., does small-business consulting and also counsels people on their next career moves, including interview skills, resume tips and networking ideas.
Her clients did not want to be seen walking in or out of her office, Glatt says. They also let her know they wanted advice from her, not someone trained by her. They would go elsewhere if she proceeded with her plans.
Glatt says she got the picture quickly and had to work on managing her workload–which meant figuring out when and how to say no.
She had to assess why some of her client relationships were successful, while others were not. For example, some clients were not willing to accept her advice, even though they were paying her for it. Others were not prepared or qualified for the career move they had in mind.
Glatt decided not to charge for the first consulting session. She takes that time to size up prospective clients, she says. Depending on what she thinks, she accepts them as clients, tells them to come back after they have accomplished certain goals, or tells them she does not think she is the right consultant for them.
Because she has only the one interview to go on, Glatt says she has learned to trust her gut feelings.
Other business owners must do the same if they are going to manage their time properly, she believes. They cannot waste work time on new-project evaluation if their calendar is nearly full.
If owners put in their original five-year plan that they eventually wanted the majority of their work to be for Fortune 500 firms in a certain industry, she says, they must work that goal into the process of evaluating potential projects.
Saying no is easier said than done, Malaszek says.
“You have to be constantly remembering your goals and motives,” she says. “At the same time, you want to appear as a bigger business and give the perception that you’re steady and stable. You want them to keep coming back to you.”
By hiring an employee, Malaszek can say yes to many of those projects again, and she also has time to drum up even more business.

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