Forums: Discussions for entrepreneurs and small business.

Hi

I started my own web design business 2-years ago. I`d been doing freelance web design on the side of my full-time job - and after getting sacked from that job, decided to make a go of it full time. I established a limited company and set about trading as a full-time web design agency.

In many ways, it`s proved a great success. I work by myself - with a couple of freelance web developers  - and have a good number of clients - ranging from small sole-traders up to some very big multinational firms. The problem I now face is I have reached a stage where I am physically unable to cope with my workload. The business has grown in to something I`m no longer in control of - and I`m seeking advice to try and find my way out of a problem that threatens to ruin my entire business.

The problem is, although things have expanded too far for me to cope alone, I am not able to take the next step in employing the staff that would help me cope and grow further. Some figures for background info: My sales turnover has been around the £90k level each year for the first two years of trading. I`ve made around £50k net pre-tax profit each year. I have about 40 clients, all of which pay me a monthly fee for ongoing services - ranging from anything between £20 per month up to £200 per month (these fees total around £2,000 per month). I spend quite a lot on marketing (between £10k and £15k per year) - and other costs include freelance personnel and bills. Currently I work from home - so have no office rent/rates to pay.

Although the financial figures are quite good for a single person working alone, they don`t give me enough scope to expand to the next step. Really, I need an office premises (approx £10k p/a), at least one other web developer (£30k), An assistant/admin/secretary (£14k) - all of which totals £55k - before my marketing / bills which push my basic costs up to around £75k per year. So on current figures, I go from making a healthy £50k profit - to an unhealthy £25k loss.

The trouble I have, is I don`t know what more I can do in order to bridge that gap and expand like I need to. I have regular local business magazine adverts, a good direct-marketing campaign (email and post), excellent search engine positions, an effective Google Adwords campaign... There`s nothing more I can do marketing-wise to increase my customer base. The area I am in has plenty of web design companies with 10 to 20 employees, big offices in town - and they`re all making healthy profits. My research shows my pricing levels are in line with them (I charge anything between £2k and £10k for my websites).

In a nutshell, I know it is possible/profitable to run a web design company with a few employees - which would help take the unbearable strain of workload off of me - but with no experience in working for such an agency (my background was with a large corporation not a web agency) I do not know what I need to do to expand profitably and sustainably. All I know is I am near breaking point - working 15-hr days, 7-days a week, with no time for family/friends/hobbies - and an increasingly disgruntled customer-base because it takes me so long to get round to their requests / build their sites. Does anyone have any experience / advice in a situation like this - where it is essential I take on some staff and spread the workload - but don`t seem to have the financial figures to justify / afford it?

 

robinsimmonds:  You are describing the classic need for capital that is related to growth of a business.  To acquire the Human Resource(s) you need to grow you will need capital to invest.  This can come in the form of borrowing, taking on a partner, or as you have described, using the working capital you have from your current operations (which doesn't sound viable for you due to the need for income you have).

So, if you can draft a proposal for the addition of the items you need with a cash flow analysis that will show how long it will take you to obtain the return on these new assets, you should be able to turn that information capital into borrowed capital with a plan that depicts paying the funds back with interest as well as a return on this investment through the growth it supports.

Do a short business plan, take it to the bank and borrow what you need on a reletively short term loan.

Hello,

As mentioned above you are trapped in a situation that is in need of financial backing. There are usually a couple of solutions to this situation.

1. If you have healthy figures to show to a financial institution, then you can apply and hopefully get a loan. Of course in this economic situation your numbers will need to be strong and distinct.

2. You can partner with someone else who can bring you financial backing or a person who is willing to become your partner and work with you without initial salary and hoping that ultimately your business will make enough money to pay that person.

3. You can sell your company and become an employee of that new company

In small business delegation of work and cash flow are two essentials that one can't ignore.

We are in a position to either buy your company and have you work with us or possibly enter into a business plan where we provide financial backing and you provide your clients.

Our company currently has web designers, programmers and marketing people. We are in the process of expanding out our business and this would be a good opportunity for both of us.

The other proposition we have is that you can refer your current and future clients to our web design firm and we can come to an aggreement on payout for you.

We are currently located in the United States.

We hope to hear back from you.

Thank you

Laleh

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