Growth is always good, right? Not exactly, at least when it comes to small businesses. Before you take the huge leap of faith that comes with expanding, there are several factors to consider.
Here are some of the signs expansion is the right choice for your business:
For one thing, you should be making a consistent profit.
Don’t just go by the amount of money that rolled in during your best two or three months. Look back on your past year or more. If you cannot be reasonably sure that your sales will continue to be as good as they are now or better, expansion might not be right for you.
You have new opportunities to explore.
If you’ve been keeping a careful eye on your inventory as well as sales trends, you might have discovered that a particular set of products and services has really taken off recently. Perhaps you’re meeting a new need or have products that fit into a recent fad. Whatever the reason, this might be a sign that you can take a chance on growing your business. Before you do, however, review any trustworthy resources at hand that can help you predict whether these forces will remain strong in the months and years to come.
You have an established base of loyal customers.
Your loyal customer base is the foundation upon which your current enterprise is built and it can be the springboard for your continued growth. However, if you are still developing this steadfast group of supporters, you should probably wait to expand until your underpinnings are firmly in place.
You have the right staff in place or you’re ready to staff up.
Success can be intoxicating, but it can also place stress on your infrastructure. If you are doing so well that you no longer have the space or staff-power to keep pace, it may well be time to take the next step and get bigger. Think of your staff as your safety net. If you have a stable team of trustworthy personnel who are knowledgeable about what you do, understand your customer base and provide excellent service, you are very lucky indeed. Expansion is made exponentially easier if you have experienced, competent support staff.
Do your research.
Is your industry growing as a whole?
Before you take the plunge toward expansion, it is crucial to determine the long-term outlook for your type of business as well as the products or services that are your bread and butter. To that end, take time to read trade- and industry-related articles. Be a sort of industrial spy, visiting competitors’ websites and social media pages to see what they are promoting and what they seem to be transitioning away from. While you can never have an actual crystal ball, doing these types of tasks can minimize your risk and help you to determine where to focus as you continue to grow your business.
Would expanding meet a customer demand?
Customers are a terrific source of data to determine what people want and which products are trending. Many are happy to give feedback and suggestions, particularly if you give them incentives such as product discounts in exchange for completing surveys. In short: Never underestimate the knowledge or power of your customer base.
What if you stayed where you are?
There are both advantages and disadvantages to continuing to stay in your current space. On the upside, customers often like the familiar and some may fail to follow you to a new location. Your current digs may also be part of a neighborhood or shopping center that helps to drive traffic to your store. Finally, you may have a comfortable relationship with your landlord that you are reluctant to end. On the other hand, your square footage may be getting cramped and could be downright impractical if you grow in size. If the area your shop is located in has changed and many of your regular customers no longer frequent it, moving might be your best bet. If your circumstances allow it, you might even be able to add more space at your current location. This might turn out to be the best of both worlds, providing you with the extra room you need, without having to go through all of the hassles of moving across town or to a different city entirely.
Is the economy booming?
When you’re busy running a business, paying attention to current events might fall by the wayside. However, you should not let your present priorities outweigh your future ones, particularly if you are considering expansion. The stock market, the political climate. and even international affairs all contribute to our country’s economic forecast. Ask questions of experts; your local chamber of commerce and small business development agencies are great places to start conducting your research. Don’t get overwhelmed; you don’t need to be an accountant or a PhD holding economist to benefit from what you learn.
Could buying another business work better than expansion?
Purchasing an established business may be the best option when it comes to growing your operations. Before you do, however, keep in mind that finding the right one to acquire can take months of dogged research. You’ll probably need to invest in a consultant to help with the acquisition process. Furthermore, you’ll need a good deal more cash than what you will pay to buy the company. Finally, the cultures of your two companies must work smoothly together.
What should I do when planning a business expansion?
Find out your business’ credit score.
Your business credit score is used by insurance companies, vendors, financial companies, and others to determine the risks involved in working with you. The higher your business credit score is, the better your chances of securing a loan or insurance policy or being granted a contract.
Improve your score (if necessary).
Since it can have so many repercussions for your business, it makes sense to improve your score if it is below 50. One way to do so is to consistently pay your bills on time. You can even submit payment more often than once a month. In addition, strive to maintain a low ratio of credit used in relation to your total credit available; less than 15 percent is optimal. Pay off your balances whenever possible. If necessary, increase your credit limit to prevent overages. If you are already paying a vendor and have a long-term positive relationship, establish a credit account with them to add to the number of positive payments in your file. Remove inaccurate negative feedback from your file by contacting credit card companies and reporting agencies.
Consider your funding options.
Loans from conventional banks are not the only possible source for funding your expansion. These days, many business owners are choosing to work with investors to support your expansion. Although this strategy involves losing some equity and perhaps even some control, the insights and experience may make the tradeoff worthwhile. Crowdfunding is another option, one that enables you to tap into your loyal base of customers to financially sponsor some or all of your expansion.
Make sure to keep your cash flowing.
When contemplating expansion, assume that it will take a lot more cash than it first appears. Consultants, overhead costs, interruptions in your current activities, product changes, and many more factors can combine to jack up your costs so be sure to allow for overages.
Make sure you’re in compliance.
If you want to grow in size, remember that your business does not exist in a vacuum. Be sure that your expansion complies with zoning, human resources, and insurance laws.
Find a better payments partner.
A state-of-the-art payment processing system can be your best friend as you take on more customers, additional payments, and more staff. It can tackle processing payments, monitoring inventory, relating to customers, managing employees, and generating reports with ease. Take time to harness all of the capabilities of an upgraded POS solution.
Double down on your commitment to personal service.
AI tools cost less and are effective ways to interact with the people you serve. These automated solutions can help customers find answers to commonly asked questions, can suggest additional relevant products. and can funnel people with more complex needs directly to you or your qualified staff for additional, personalized help from a human being.