Like all things, businesses grow. At some point in your business’ life, you will be faced with the question, should we expand?
This is not a question that should be taken lightly. Expanding your business will come with a whole different set of hurdles and obstacles for you to overcome.
Before you make any rash decisions, make sure you have done your research, understand your position and are ready to take the next step!
You have the financial resources
It’s no secret that running a business is a sizable financial operation, and expansion is no different. Thus, the first place you need to look if you desire to expand is to your financial resources.
Do you possess the financial capital, revenue, cash flow and equity required to fund an expansion? Increasing your current operations is a large financial commitment, so being aware of the position you’re in is vital.
Besides the obvious costs, such as overheads or inventory costs, you’ll also need to account for any unforeseen or one-off costs that may come with expansion. Failing to budget for these additional costs could derail your expansion before it even begins.
Your customers love you
Your customers are a constant and unbiased goldmine of information and feedback, all you need to do is be willing to listen. As a result, they are an excellent place to seek guidance on whether or not it is wise for you to expand.
Telltale signs to look for include, having a sizable portion of your consumer base pleading with you to open a new location or expand your operations, an engaged and loyal following or an expanding interest from segments outside of your core audience.
Nowadays, customers are more willing to interact with their favourite brands, through social media, reviews and testimonials. So be alert, if your customers are screaming out for you to expand, they won’t be shy about it!
You’re running out of space
With an increase in customers, generally comes an increase in stock, which will require an increase in storage or floor space. Thus, if your current site is getting a little cramped and you don’t really have room to move, it’s time to expand.
However, before you make any concrete decisions, make sure any increase in demand is consistently high for at least several months. Make sure you understand your sales-cycle, as increases in demand could simply be due to your ‘busy’ period. Don’t sign up for a new space simply because you’ve had one or two above average months.
You have solid systems in place
Take a step back from your business, what would happen to the businesses performance if you handed control over to someone else? Would its output improve, maintain or suffer?
Before you consider expanding, you should ensure your systems and processes are sound enough that anyone could pick them up. For example, if you had to step back, would your 2IC be able to step into your role easily? If you had to unexpectedly hire three people, do you have the training systems in place to bring them up to speed? What if there was an expected lull in revenue, would you be able to ride it out?
Even with tried and tested systems in place, an expansion will be a bumpy road. That’s why you will need to assure that these systems can scale effectively.
As a business owner, the idea of growing your business is always exciting. However, expansion is not always easy. There will be rough times and you may question the decision.
But if you have taken all the necessary steps, budgeted correctly, understand your market and listen to your customers, you’ll be in a good position to manage the transition.