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The early days of running your own small business are so difficult. You’ve got to build a good customer base and market your brand effectively on a shoestring budget and so many businesses run out of money before they manage to start turning a profit. But if you make it that far and your business is in a stable position, you can start thinking about your next step. Some people are happy to keep the business ticking over as it is and they’re not worried about expansion, but that’s not always the best thing to do. If you’re not expanding product lines and offering something new to your customers, they’re going to drift away and the business will end up in trouble. That’s why it’s important to aim for business growth.
However, attempting to expand is the thing that kills a lot of businesses because you’re taking a big risk and investing a lot of money and if it backfires, you could end up running out of capital completely. The reason that this happens is often that business owners start trying to grow the business before they’re ready. That’s why you need to make sure that it’s the right time for expansion before you start making plans and spending money. These are some of the things that you need to consider when deciding if now is the right time for business growth.
Are You Equipped To Handle A Large Business?
This is so important because running a large business is very different from running a small one. When it’s just you and one or two employees in a small office space, managing everybody isn’t too difficult. The amount of money that you’re dealing with is also fairly manageable and you shouldn’t have too much trouble doing your finances. But if you start expanding, move into a big office, and hire a large team, things are going to get a lot harder. You need to be honest with yourself about whether you’re equipped to deal with those new challenges. If you aren’t, you need to invest a bit of time learning how to run a business effectively before you start thinking about growth. It might be a good idea to do an online degree in business & management so you can learn more about organizing a larger business, handling your finances, and leading a team. You’ll also learn about the global business which is very important if you’re expanding and considering the possibility of moving into other countries.
If you don’t take the time to improve your skills as a business leader before you start facing all of the challenges associated with expansion, you’re going to really struggle to handle the growth and it’s likely that you’ll fail. It’s not just about your skills as a business leader either, you also need to think about whether you really want to deal with running a large business. It takes a lot of time and it’s incredibly stressful. If you like running a small business because it lets you work to your own schedule and gives you a bit more time to spend with your family, you might not enjoy running a larger business. Before you start growing, you need to decide if you’re really prepared for the reality of running a large company.
Are Your Profits Sustainable?
It goes without saying that you need to be turning a profit before you start expanding, but a lot of business owners jump the gun and immediately start planning for growth after seeing a short period of sustained profits. But what happens if those sales drop off again after a couple of months and you’ve already spent loads of money on growth? In that case, you won’t have the revenue to cover your increased overheads and you’re going to be in a difficult financial position. Most businesses experience peaks and troughs with sales and some businesses are more seasonal so they might do well in the summer and then have a quiet period during the winter. It’s important that you make sure that your profits are sustainable and it’s not just a temporary surge in sales that you’re seeing.
One of the main things that you should look for is to repeat customers. If you’ve got a lot of loyal customers that are buying products from you regularly, it’s likely that you’ll be able to maintain the level of sales that you’re getting at the moment. But if all of your customers are only buying from you once or twice and then you’re losing them, there’s every chance that sales can drop off very quickly and that’s when you’re going to be in trouble. It’s best to monitor sales over an extended period and make sure that they’re going to be consistent before you even think about expanding the business.
Do You Have The Money?
This is an obvious one, but a lot of people get it wrong. It costs a lot of money to expand a business because you’ll need to hire more employees and upgrade your office space. Then you’re going to need a marketing push to get more customers in and if that’s a success, you’ll need to expand your manufacturing and shipping operation to meet demand. All of that costs money and once you’ve made that investment, there’s no going back. The big mistake that people make is thinking that they can rely on the increased sales revenue to cover their overheads but that isn’t always going to work. You can’t guarantee a massive surge in sales as soon as you launch your marketing campaign, it could take a while before your revenue starts to increase as you expand and you need to keep the business up and running until then.
The safest way to fund your expansion is to have enough cash saved up to cover your running costs for a few months at least, if not more. Borrowing is another option but you don’t want to saddle yourself with too many debts. The best thing to do is start putting money aside when you’re profitable and save up a good amount so you’ve got a buffer to fall back on if you aren’t bringing in enough revenue to cover your increased overheads.
Do You Have A Good Marketing Plan?
Finding more customers is key to successful expansion and that means you need a solid marketing plan. If you’re marketing to the same set of customers that you currently are, you probably won’t see enough of a sales increase to fund your expansion, which means that you need to break into new markets and that’s not easy. The first step is to do some market research and identify different demographics that may be interested in your products. Then you’re going to need to work out which marketing techniques connect with them if you’re going to have any success. The biggest mistake that you can make is thinking that you can just pump more money into your marketing department without changing your approach because you won’t connect with any new markets and sales aren’t likely to increase by that much.
If you don’t have a detailed marketing plan in place that outlines which new markets you’re going to target and how you plan to connect with them, your plans for growth are likely to fall flat very quickly.
Do You Have The Right Business Processes In Place?
A small business that deals with a relatively low volume of orders doesn’t rely too heavily on business processes and it’s easy to just take it as it comes. But that approach isn’t going to work when you start to expand and you’re dealing with a lot more orders. Things will get chaotic and that’s when your customer service will suffer and people will start receiving their orders late. You’ll have the same issue when you start hiring more employees because it’s simple to deal with things when there are only 2 or 3 of you in the business, but if you increase that number and you’ve got a lot of different employees from different departments trying to collaborate, things will quickly fall apart if you don’t have good business processes in place.
If you’re going to be able to manage your expansion effectively, you need good processes that deal with generating leads and passing them over to sales. Then you’ll need processes that track the journey of an order from the time that it’s first placed all the way up to the product being delivered to the customer. One of the big mistakes that people make is attempting to put these processes in place as an afterthought once they realize that they can’t handle the increased demand. You need to start thinking about these things now and developing processes so when you do start making more sales, your team is equipped to deal with them efficiently so your customer experience doesn’t suffer.
If you can answer all of these questions confidently and you’ve thought through every detail of your expansion carefully, now is the time to look into growth. But if you’re unsure on any of these points, now isn’t the time to start growing your business.