5 Things to Consider When Expanding Your Business
Well done you’ve got your business off the ground and now it’s time to decide what to do next to take it to the next level.
The dilemma most small businesses face is the same yet there is no hard and fast rule that guarantees a successful outcome.
At some time all businesses need to make decisions that come with a lot of risks. For example when to staff up. Do you staff up now to meet the expected demand from new marketing initiatives, or do you hold off on acquiring more workers until the additional sales happen and your business is guaranteed the revenue?
No two businesses are exactly the same, so there is no one right way to take to grow a business. The owner’s confidence and appetite for risk will dictate the action taken. For example, some business owners may consider keeping the status quo. This option surely keeps your money firmly in your pocket; however, the risk is a competitor will fill the space and strengthen their position all the while weakening yours, so the keeping the status quo doesn’t work in the long term.
Businesses need to focus investment in growth strategies to not only gain more market share but to also counter the rate of attrition or churn rate. There really isn’t a customer for life, over time their need for your product or service will wain and when your best customers go, revenue drops and eventually the business will go belly up. Therefore standing still is not an option for any business that wants to remain viable.
So when is the right time to expand? Here are 5 considerations that may help you decide.
1. Assess Your Current Financial KPIs
Assessing your key performance indicators (KPIs) is a really good way to assess when your business are ready for the next step in it’s development. KPIs can be used to measure all areas of the business and in particular sales and profit.
If, for example, your business is meeting revenue and profit targets, then you may well feel you have the position and confidence and to grow and your funding providers are likely to look it in the same light and continue to support you.
Similarily if the KPIs are not being met, it’s not time to grow, rather more radical change may be required to get the business back on track.
2. Do You Have Healthy Cash Flow?
All businesses need a healthy cash flow to operate. Make sure you’re making a profit and then invest it back into your business. Investors will also fund companies with strong financials.
3. Calculate the ROI of an Expansion
Calculating the return on investment (ROI) is crucial if your plans for expansion are to come to fruition, especially if you need third party funding. The financial statements need to show that there’s a healthy profit margin, and the overall profit grows due to expansion and that it can continue to scale upwards.
4. Does Your Premises Measure Up
A growing enterprise will outgrow its premises many times over, particularly in the first ten years, so don’t get locked into long leases. “Location, location, location” is your top priority when looking for business premises. Use the location to promote your brand and attract sales. Choose the best building in the best location you can afford at the time.
‘Perception is everything‘ so invest in a commercial fit-out that screams success.
5. Many Hands make Light Work
Expanding a business usually requires extra staff and management. Discuss your expansion plans with your existing team, to get their feedback and their buy-in. You need your team on the same page as you and you will need them to step up and take on more responsibility in your business as it grows. They need to be inspired by the opportunity of a growing business and how more responsibility equals more reward.