Congrats, your business is thriving! Your revenue is strong. Profits are growing. Cash is accumulating in the bank. Your customers are happy and so is your staff. You’re starting to wonder if now is the right time to expand your business; but you’re concerned that perhaps you’re overreaching and may be looking to leap too soon. Sound familiar?
First, your uncertainty is understandable. Successfully expanding your business is about timing. If you make the move too soon, your business may not be able to sustain the growth. On the other hand, if you wait too long, you might miss your window of opportunity. It’s also possible that you’d see profits slide if you’re unable to keep up with demand and interest. How do you know when the time is right? Here are six areas that you need to consider before expanding your business.
You Have Systems and Processes in Place
If you wanted to take two weeks off to tour the countryside of France, could you? If your business is dependent on you being a hands-on, active, always present leader, you may not be ready to expand. You, as business owner, need to be able to work on the business, not in it, before you grow. The stronger your internal foundation, the more able your business is to handle an expansion.
Here are some questions that will help you determine where you stand:
- Are your business policies and practices documented and easily communicated?
- If you were to hire new staff tomorrow, do you have document that would outline the expectations and responsibilities associated with each role?
- Could someone step in and service accounts without the client feeling disrupted?
- Are your current systems scalable? Are they capable of handling increased capacity?
- Can you automate some areas of your business to allow you and your team to focus on increased business?
Your Customers Want More
Focus on supply and demand. If demand is consistently outpacing your supply, it’s time to sit down and seriously consider expanding your business. This might be the time to add staff and/or grow your physical footprint to accommodate the increase in business.
You Can Sustain the Cost of Growth
Growing your business brings additional expenses. There are the obvious costs such as salaries, stock, and increased rent for a larger (or an additional space). There may also be other costs that you haven’t considered. For example, if your small business adds personnel, you may reach staffing minimums related to healthcare benefit requirements. And with each new employee, you may incur costs for additional technology needs. As you expand, there may be a need to hire additional team members dedicated solely to specific functions, such as IT or HR. Do your due diligence and understand the full cost of expansion before you move forward.
Your Industry is Growing
If your competitors are packing up and leaving town and no one else is entering your market, think twice before moving ahead with your plans to expand. You don’t want to be in a saturated industry where it’s hard to stand out from the crowd and your margins are razor thin. You also don’t want to be operating in a space where interest in what you have to offer is waning. When considering an expansion, take a hard look beyond your business, and consider your market and industry as well.
You’ve Got a Rainy-Day Fund in the Bank
If your business has positive cash flow and you’ve built a healthy cash reserve in the bank, it may be time to consider how you can reinvest some of those dollars back into your business. Remember, inertia doesn’t exist in business. You’re either growing or you’re shrinking. Chugging along at status quo may work for a while, but if cash is just gathering in your account, it’s time to decide what’s next.
You’re Following a Plan for Growth
Your business goals should include a progressive roadmap of growth. If you’re hitting the milestones you previously set and you’ve got a plan on how you’re going to manage the upfront costs and growing pains, then you may have reached a reasonable point to advance to the next rung on your pre-planned growth ladder.
Finding a Reliable Partner
You don’t have to do it alone. An experienced team of advisors, like the experts at Peek Advisory Group can provide you with an honest, thorough, unbiased financial assessment to help you understand what’s really going on your business. Such an analysis is crucial before you pull the trigger on expansion plans. This will enable you to march into the next chapter of your business with your eyes wide-open.