Are You Ready to Expand Your Business? 3 Tips on How to Approach it

Growth and expansion are not just two words in the dictionary. These two words define a business owners’ hard work and they are the key goals of any company. However, achieving exponential growth and expansion at the same time is not a piece of cake. In today’s lackluster and slow economy expanding a business is an ordeal. So, you have to be smart, thoughtful and responsible. In fact, the chances are that everything is running smoothly and you see a lot of room for growth. But you have to keep in mind that the current situation of your company cannot be compromised at the cost of unsupervised expansion. Below are some things that you have to take into consideration before expanding your business.

Are you capable of handling new business costs?

 

Let’s face it, the expansion will burn a hole in your pocket. There is a considerable amount of amount that goes into expansion. It includes overhead costs like salaries, extra office space, cost of research and a new product. All these costs including regulatory costs will hamper your budget if not taken into consideration in the beginning. So, create a cost plan first. This will help you save cash needed for expansion.

 

In addition to this, you can also improve or increase the existing process of your business by bringing a change in the existing workflow. For instance, your company takes 2-3 months to convert a lead into a potential customer. In this case, reduce the timeline and find ways to decrease the time from 3 months to 1 month. This way you will have the extra cash required for expansion.

 

Do you have enough cash?

One of the main problems behind the expansion is that they do not have enough cash. Some businesses even compromise with the salaries of their employees. Which, in turn, leads to unhappy employees and gradual downfall. So, make sure you do not expand your business until you have achieved your goals. In fact, sometimes it is not wise to expand even when your business is booming. First, because you have a debt to clear, business creditors to look after, and cash reserves to maintain. This is why as a business owner you have to first take care of the debts eating into your reserves.

 

Additionally, you also have to look into the amount you are willing to spend on the office. The amount should match your expectations. In other words, if you plan on building a fancy office you should have the money to build a fully-equipped modernized office. But if you think you can afford only a simple office, don’t be tempted and build what fits your budget. After all, the success of your business will be defined by your work.

 

The next thing that you have to consider is your debt. Ask yourself how much interest you have to pay? Will the cost affect your future reserves and credit scores? If yes, drop the idea of expansion for now because you need a good credit score to qualify for a loan.

 

On which stage of the business cycle are you at?

This is one of the vital factors and it will help you decide whether you qualify for business expansion or not. A business grows on a S-curve. This means, there are a total of three stages in a business – startup, midsize, and full-grown. All these stages help you categorize your company on the grounds of revenue and employee strength. If you are in between the first two stages, the idea of expansion can hurt your budget, growth, and success at the same time. Let me give you an example, moving from 5 to 8 employees is easy but to move from 8 to 100 employees will be a challenge and you have to act wisely.

 

So, measure the stages and group your company into a specific category. Then analyze where do you stand in the business life cycle, what is the size of your company, and how will you reach from point A to point B without overburdening the reserves.

 

The Bottom Line

Expansion is an integral part of business growth. If you are expanding and opening different offices at several locations, means that you are growing steadily. But money has a vital role to play here as it solidifies the expansion of your business. We can compare it to buying dogs for protection to keep a child company in the park. This is to say that you cannot expand blindly, especially when you are on the brink of achieving success. So tread carefully and make sure you don’t burden your bank account while trying to stay at the top of the competition.