Maryland is a thriving hub for small businesses, with an entrepreneurial spirit driven by innovation and growth. In 2023 alone, there were 101,704 new business applications, showcasing the ambition of Maryland business owners. With an impressive 99.5% of all businesses in Maryland classified as small businesses, the competition is fierce.
As a small business owner, you’re constantly fighting tooth and nail to grow, needing to be ready to seize every opportunity that comes your way. Building an expansion fund is essential to ensure you’re prepared for these opportunities. Partnering with a local financial institution like SECU can provide the support and resources you need throughout this journey.
What is an Expansion Fund?
An expansion fund is a dedicated savings pool for future business growth opportunities. Consider setting a savings goal, such as allocating 10% of your profits annually to this fund. This disciplined approach allows you to build a robust financial cushion, so you can act swiftly when the right opportunity presents itself. Whether you’re looking to enter new markets, hire additional staff, or upgrade your facilities and equipment, an expansion fund provides the necessary financial flexibility.
Why an Expansion Fund is Crucial for Small Business Success
Maryland’s diverse business landscape includes sectors like professional services, healthcare, social assistance, and construction. Proximity to Washington D.C. also means numerous government contractors call Maryland home. For these businesses, growth opportunities abound, making it crucial to plan ahead financially.
Having an expansion fund allows businesses to:
- Seize Opportunities: Be financially prepared for both expected and unexpected opportunities, such as new contracts, expanding services, or entering new markets.
- Hire Additional Staff: Quickly onboard skilled employees to meet increasing demand or new project requirements, particularly important for professional services and government contractors.
- Upgrade Facilities and Equipment: Invest in state-of-the-art equipment or expand physical locations to stay competitive and meet industry standards.
- Maintain Cash Flow: Ensure that you have a financial cushion to manage periods of fluctuating cash flow, which is common in sectors like construction and healthcare.
Creating and Implementing a Business Savings Plan
1. Evaluate, Reallocate Resources, and Set Savings Goals
Conduct a thorough financial review to understand your current expenses and savings. Identify areas where costs can be reduced, such as streamlining processes or eliminating unnecessary expenditures. This evaluation helps free up resources that can be redirected into your savings goals, whether they are for emergencies, medium-term objectives, or long-term investments. By aligning your spending with these goals, you can more accurately determine the right amount to save and choose the appropriate savings accounts. This step is crucial for businesses to ensure they have a solid financial foundation and are prepared for both immediate needs and future growth.
2. Align Your Expansion Fund with Your Business Goals
To build your expansion fund, start by ensuring your budget includes regular savings contributions. Prioritize spending that aligns with your long-term business goals. Invest in areas that enhance growth, such as marketing, technology, and employee development. Automate these savings transfers to make consistency and discipline easy.
Consider opening a SECU Money Market Account for businesses to maximize the growth of your funds. These high-yield accounts offer competitive interest rates while promising the flexibility you need to seize opportunities as they arise. Schedule an appointment with a SECU member advisor to for help aligning your financial strategy with your business objectives.
3. Select the Right Savings Account
Choosing the right kind of savings account for your expansion fund is crucial. Different types of accounts offer various benefits, and using a combination can maximize your fund’s growth and ensure you are prepared for both short-term and long-term needs.
Standard Savings Accounts
- Flexibility: Ideal for businesses needing easy access to their funds for short-term needs
- Immediate Liquidity: Offers quick access to funds, making it suitable for immediate, unforeseen expenses, such as emergency staffing needs or unexpected equipment repairs
- Lower Interest Rates: Typically offer lower interest rates compared to other savings options, but provide the benefit of liquidity for professional services firms needing to quickly adapt to client demands
Money Market Accounts
- Medium-Term Savings: Suitable for businesses saving toward growth initiatives planned a few months to a year ahead, like hiring additional staff or expanding into a new service area
- Higher Interest Rates: Generally offer better interest rates than standard savings accounts while still providing some access to your funds, making them a smart option for maintaining a healthy cash reserve
- Limited Transactions: While you can access your money, transactions are often limited, encouraging more disciplined saving
Certificates of Deposit (CDs)
- Disciplined Saving: Penalties for early withdrawal underscore the importance of leaving funds untouched, aligning with long-term business goals
- Fixed Terms: Funds are locked in for a set period (ranging from 3 months to 5 years), so your business has funds for specific future needs
- Highest Interest Rates: CDs typically offer the highest interest rates among savings options, making them perfect for significant future investments or long-term savings
Partner with SECU for the Next Phase of Your Business
Planning ahead with an expansion fund is essential for your business’s growth. Start saving today to ensure you’re ready to capitalize on future opportunities. By following these strategies and leveraging the support of a local partner like SECU, you can effectively plan for and achieve your long-term business goals.
Why Choose SECU?
- Lower Fees and Better Rates: Enjoy competitive rates and lower fees compared to traditional banks, offering better value for your investment.
- Personalized Financial Strategies: Get tailored savings strategies from SECU’s financial advisors, designed to meet your specific business goals.
- Community Focus and Support: As a local institution, SECU understands the unique needs of Maryland small businesses and is committed to helping the community and local businesses thrive.
Schedule a virtual or in-person appointment with a member advisor today and start your journey toward growth and success.