Have you begun to wonder if your business is ready to expand? It’s a tough question to answer. Even if all indicators point toward making this move, you don’t want to jump the gun. This is a big decision that will impact you and your company in a number of ways.
Here are some of the questions that will continually run through your head:
- What are the financial benefits of expanding?
- What are the potential risks?
- Do I have the time to take on the added responsibility?
- Will I need to hire additional staff?
- Will it require a large outlay of cash?
At some point, you need to make a final decision: Are you going to expand, or will you wait?
Expand now or later?
You may have come to the conclusion that your business will expand at some point. But that doesn’t mean you have pinpointed when this will happen.
There is a big difference between expanding just to expand and expanding at the best time.
Here are five points that will help you identify the best time for expansion:
- You have reached your original goals
Take a look back at your business plan. What do you see? If all your original goals have been met, it may be time to set new goals. This doesn’t necessarily mean you have to expand, but you are in position to take on the challenge.
Furthermore, and most importantly, if you have reached your original goals, you now have the experience and confidence necessary to take on this process.
- You recognize the demand
As an example, let’s assume you are in the restaurant business. You have a single location that continues to perform well. Customers always provide positive feedback, with many noting they would love to see another location in the area.
Sometimes, the best way to determine when to expand is to ask your customers or clients for feedback. If they think it is a good idea — and if they can back up this sentiment with solid reasons — you may be onto something.
Pro tip: You can also enlist the help of these same customers during the expansion process. Sticking with the restaurant example, ask for feedback related to location, menu, hours and similar details.
- You have researched the opportunity
It is easy to believe that you can expand your business and continue to achieve the same level of success. But is this guaranteed? Definitely not.
You have to research every angle of the expansion, ensuring that no stone is left unturned. Some areas of interest should include:
- Time requirement
For some companies, expansion means nothing more than adding employees. For others, this means renting additional office space, sometimes in a different part of the country.
Regardless of your expansion plan and goals, there are details that deserve your attention. Have you researched the opportunity, inside and out?
- You know the capital requirements
Biting off more than you can chew, from a financial perspective, can kill your expansion plans before they ever get up and running. Worse yet, the wrong approach could put your company at risk for real financial trouble.
You need to know, down to every last dollar, how much you will spend to expand your business. This includes everything from the cost of hiring new employees to rent and everything in between.
Additionally, make note of how you plan on paying for the expansion. Do you have cash in the bank? Do you need to raise money from investors? Do you require a small business loan?
- You have a sound business plan
When you started your company, you created a business plan that touched on a variety of topics, such as your mission, marketing analysis and financial details.
You should do the same before expanding. As you work through the plan, you will get a better idea of whether now is the time to expand. The questions you answer will give you a clear idea of where you stand.
Pro tip: Copy your original business plan (to a certain degree). This served you well once, so it may be able to do so again. Focus on the same core areas, with the idea that you are not starting fresh but instead expanding on your current operation.
Pros and cons of expanding
Just because you feel good about expanding doesn’t mean you have to take the leap. Now may seem like a good time, but you should still understand the pros and cons associated with such a big decision.
- Ability to reach new customers
- Ability to generate more revenue and profit
- Opportunity to hire more employees, thus helping the economy
- Capital requirements
- Potential to spread your company, as well as yourself, too thin
- More money, more problems (Yes, this can be true.)
It’s not always easy to identify the best time to expand your business. Let the five points above guide you on your journey. When you rely on these tips, and compare the pros and cons, you will find yourself in position to make an informed and confident decision.
Do you have any additional business expansion advice to share?
About the Author:
A regular contributor to the GoDaddy Garage, Meredith Wood is the Editor-in-Chief at Fundera. Fundera is an online marketplace for small business loans that matches business owners with the best funding providers for their business. Meredith is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more. Meredith is also the Senior Financial and B2B Correspondent for AlleyWire.
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