Expansion is a natural step in a business’s life and a goal for most owners. This is also when many businesses end up failing, ironically. Sudden growth can be one of the worst enemies for a business when not planned properly.
Some end up stretching themselves too thin, and others don’t have the systems in place to manage their growing assets and operations. Others might not be ready to handle the additional administrative load. This is why you must know if you and your business are actually ready for the jump. Here are a few things you have to consider before you start expanding your business.
What Am I Actually Trying to Achieve?
You have to identify exactly why you are deciding to expand. Maybe you want to expand your service scope,or be able to reach more people through a second location.
As you can see, these are two different goals that will have different requirements and benchmarks. In one case, you’ll need to do market research to see if the service you’re thinking of offering is actually in demand and if many competitors are offering the same service. In the other, you have to look at the perfect location, make sure that you look at things like permits, zoning laws, and ordinances, and see if moving would actually allow you to get a return on your investment.
In both cases, however, getting more sales should be the ultimate goal. If this is not your main intention, then you might want to reconsider.
Can I Handle the Rising Costs that Come with Expansion?
This one can be difficult to ascertain if your operation is still small. You might not be aware of how much opening a second location will cost. You’ll have to hire new staff, and have additional bills to handle. Financing and additional sales can help, but you can’t assume that you’ll be able to survive off of borrowed money or think that expansion will lead to overnight success, so this something you’ll need to be aware of.
Can My Current Structure Handle Growth?
Your current organizational structure might not be flexible enough for growth, and you might have to review your current processes. For instance, you might decide to offer different services in another location, or different products. In these cases, you might need to work with new suppliers or make some changes to your supply chain. You might also decide to treat the new locations as a separate entity if they’re noticeably different from your main location.
This is where a business advisor can help. One of the benefits of business advisory services like Brown Smith Wallace is that they will be able to look at your operation and processes, and see how you can streamline them. They can also look at your expansion plans, and see how you can shift your structure to make it more flexible and efficient. Also, they’ll be able to craft a strategic plan for growth that will allow you to monitor progress and continually improve along the way.
Expanding may seem like an easy decision to some, but it isn’t. It’s up to you to make sure that you have a solid plan for expansion and don’t base anything on assumptions unless you have clear data to back it up.