Ready to Expand Your Business? Ask Yourself These Three Simple Questions
Is your business booming? Are your customers constantly asking for more of what you offer? It’s a high-quality problem to have, but it raises the critical question of whether now is the right time for expansion. According to Statista, only 8 percent of small businesses surveyed believe it’s a good time for expansion. Similarly, the U.S. Chamber of Commerce Small Business Optimism Index found that 50 percent of small businesses have shelved expansion plans due to economic concerns.
If you’re contemplating broadening your horizons, it’s essential to make informed decisions. Start by asking yourself these three simple yet crucial questions to determine if expanding your business is the right move.
What Conditions Are Driving Your Potential Expansion?
Understanding the factors that are propelling you towards expansion is the first step. Here are some common reasons why businesses consider growing:
1. Demand is Outstripping Supply
Have you noticed your location(s) getting too crowded, even during off-peak hours? Are customers traveling long distances to reach you? If you’re selling out of products or overbooking services, it’s a clear sign your demand exceeds your supply. This could mean it’s time to consider additional locations or increased inventory.
2. It’s Time to Leverage Your Brand
Consider whether expanding your services could benefit your existing customer base. For example, if you run a local gym, adding nutritional counseling might attract more members. Or, if you own a garden center, branching into landscape design could both increase revenue and attract a new customer segment.
3. The Web is Calling
In today’s digital age, going online can offer significant strategic advantages. For instance, if you operate in a region with low labor and real estate expenses, maintaining an online store could allow you to undercut national competition while reaching a broader audience.
Have You Considered Initial and Ongoing Expansion Costs?
Expansion is not just about meeting demand; it’s also about managing costs effectively. Here are some key considerations:
1. Adding One or More Locations
Opening new locations involves more than just finding a space. Research taxes, zoning ordinances, and the demographics of your potential new area. Ensure the cost of the new location justifies the additional business it will bring.
2. Hiring More and Better Talent
Expanding operations often means hiring more staff or individuals with specialized skills. Consider the costs of recruitment, onboarding, training, and possibly licensing. The time and money spent on these activities can add up.
3. Increases in Operational Overhead
Think about the various operational costs that will increase with expansion. This includes everything from additional insurance and computers to more checkout stations and even the small things like extra toilet paper. Ensure your financing plan covers all these increased expenses to avoid financial distress later on.
Even if demand is high, remember that expansion comes with significant startup costs. These costs can temporarily affect your bottom line, so it’s crucial to plan accordingly.
What Are Your Financing Alternatives?
Once you’ve assessed the conditions driving your expansion and considered the associated costs, it’s time to think about financing. Using credit wisely can support your growth, but be prepared for the unexpected. Here are some factors to consider:
1. Construction Delays
If your expansion involves new construction, delays can be costly. Plan for contingencies in your budget to cover unexpected hold-ups.
2. Inspection Hold-Ups
Building out a new location often requires passing various inspections. These can be time-consuming and may delay your opening date.
3. Increased Compensation for Staff
Attracting qualified staff might require offering higher wages or better benefits than you initially planned. Make sure your budget accounts for this possibility.
4. Contract Fall-Throughs
Sometimes, big contracts fall through unexpectedly. Having a contingency allowance in your budget can protect against the financial impact of such events.
Explore financing options with your bank or other sources of quick small business capital. Adding a contingency allowance to your expansion budget can help protect against these uncertainties.
Ready to Expand?
Expanding your business can be a thrilling yet daunting prospect. By asking yourself these three simple questions, you can make well-informed decisions that align with your business goals and financial realities. Whether it’s understanding the driving conditions, calculating initial and ongoing costs, or exploring financing alternatives, taking the time to plan thoroughly can save you from potential pitfalls.
Remember, the pressure to seize an opportunity can make you feel rushed, but thoughtful consideration and strategic planning are essential. If you’re ready to take the next step, consult with your trusted associates and perhaps even get professional advice to ensure you’re making the best decision for your business.
Ready to expand your horizons? Start by assessing your current situation and weighing the pros and cons. With careful planning and execution, you can turn the knock of opportunity into a door of success.
