Four years ago, Kris Ruffenach made his first big business decision: He was going to quit working for other people and put his carpentry skills to use in his own home remodeling business.
Now that the business, Ruffenach Construction and Remodeling in Westville, is up and running — with three employees on the company payroll and business coming in steadily — Ruffenach is faced with his next big decision:
Is it time for his business to grow, and if so, how?
“It's a strange place I'm in right now,” Ruffenach said. “In order for me to grow, I can't do things myself. But in order to be able to afford everything and stay alive, I would save a lot more money if I did everything myself.”
When it comes to small business owners and their priorities, growth is second only to survival. Because of that, the question of when and how to grow can be fraught. Adding staff or moving to a bigger space could spell success for a small business, but if the timing is off, the results could be catastrophic, even fatal.
This should-I or shouldn't-I sentiment is pervasive throughout the small-business community right now.
PNC Bank's recently released biannual national economic outlook survey shows that owners of small to midsized businesses are cautious about expansion, with three out of four saying they do not intend to hire new employees or seek new loans in the next six months.
In New Jersey, the prospects for small business growth seem somewhat less grim, said Bob Young, PNC Bank's market manager for business banking in the state.
“It seems like it's stabilized,” he said. “People are looking for opportunities to grow their businesses again, but it's not anywhere near at the pace prior to the recession.”
Young said that's a good thing. Businesses are being more thoughtful in their approach to growth now, and banks have largely reined in loose lending practices.
So when small businesses do approach a bank such as PNC wanting help financing an expansion, they need to have their ducks in a row, Young said.
Overall, lenders look at stability, Young said. Has there been stability in sales over time — not just a quarter or two but over the course of a year or more? Is the business's client base diverse, making sure the company doesn't rely too heavily on one client for the bulk of its business? And is the business generating profit to go along with the increase in business?
They also want to see a buttoned up business plan that outlines the plans and projections for the expansion and what that will mean in terms of income, profit and cash flow, Young said.
Sometimes, usually with smaller businesses, those elements don't add up, and the lender becomes more like a parent, reining in over-eager business owners, Young said.
“The business itself sort of dictates the thought process that a business owner has,” he said. “For the small businesses, I think it's tougher. I think they need that guide.”
For Bill Kapas, president of J.C. Kapas Real Estate Company, asking for help has been critical in the expansion of his Rochelle Park-based company, which matches restaurant buyers with properties.
The company has added five new salespeople in the past year and is looking to branch out into a bigger main office and to add a satellite office in the New Brunswick area, Kapas said.
At the same, Kapas has hired outside consultants to help him learn to better train and manage people. Those consultants, plus the implementation of a customer relationship management system, has amounted to about a $40 to $50,000 investment — one Kapas said will pay off in overall company growth.
“For a long time, I was working in my business and really being the main source of sales,” Kapas said. “I couldn't handle the amount of work that was coming in.”
Now, he added, “I believe we're on the road to success.”
As Ruffenach debates the growth question, he has taken to analyzing his business plan daily. On paper, the business is ready for the next step, he said.
“I've been in the same position for too long,” he said. “I have grown; I've just been flatlined for a little while.”
“It's about time to take at least a couple more steps,” he added.
But then the risk rears its head, and Ruffenach worries that if he takes on more employees, the slow times for his business will become that much more painful.
“One of the hardest parts about running a business, for me, is having that responsibility to make sure that everyone is taken care of,” he explained. “When we're slow, I feel it's my fault. It's a lot of pressure to know that other people's families depend on you.”
“But the more I expand,” he added, “the more people are getting off the unemployment line.”
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