You are not alone if you dream of seeing your vision grow and expand into a larger business. All business owners want their baby to grow. It’s perfectly understandable. The hard part is recognizing when it’s the right time to expand the business. Too soon and you risk imploding; too late and you miss the boat.
Business growth often happens organically, but once you reach a certain size, you need to take a more proactive approach. It’s the only way to stay in control of what happens next. Here are some tips to help you manage your business’s expansion.
Is it the Right Time to Grow?
Making plans for expansion is not something to undertake lightly. Opening a new office or stocking a new line of products will have a big effect on cash flow and the everyday running of the business. It is essential that you examine whether or not you have the capital to fund an expansion plan.
If the business grows too quickly, you could lose money, so it is important to recognize that business performance can be variable. For example, you may have considerable equity carried forward from a previous year, but if profits are down in the current year, making plans for expansion is probably neither sensible nor advisable.
The Building Blocks of a Successful Business
Successful businesses are in control of their costs and their debts. They understand their core competencies, they have a good team in place, and they are busy consolidating on the growth already achieved. You need to stay in control of your cash flow before implementing expansion plans. It would be foolhardy to sign a lease on a new office if you don’t know what your expenditure is likely to be in the next six months, or even if you can build a client base in the new location.
Make plans on paper before you do anything concrete. Create budgets and calculate profit projections based on multiple scenarios, including worst-case scenarios. Do not underestimate the costs associated with growing a business. The more prepared you are, the less likely you are to run into problems moving forward.
Too Fast, Too Soon
Growing too fast is the downfall of many businesses. Without an achievable framework in place, there is a real risk you won’t have the resources to meet your commitments. It’s all very well introducing a new line of products or opening a new shop, but if this diverts resources away from other parts of the business, you could be in trouble. It is also unwise to take on too much debt to fund business growth, as you could end up losing money rather than making money.
Financing for Business Growth
Unless you have sufficient equity in the business, you need to look at alternative ways to fund your expansion plans. Credit cards, invoice financing, or even a Kickstarter campaign can fund a short-term seasonal expansion plan. For larger business expansion plans, you may need to look into a business loan, home equity financing, peer-to-peer lending, crowdfunding or investor funding.
The important thing is to choose the finance plan that best suits your requirements. Each has its pros and cons, so talk to your accountant or a financial advisor before you make a decision. If you elect to apply for traditional bank financing, you will need a business plan that details your cash flow, liquidity, and any collateral you have.
Smart Ways to Grow
There are many different ways to grow a business.
- Open a new office or outlet – this is sensible if you want to expand into new locations or markets.
- Diversify – Look at different products and services that are compatible with your current business. This will give you more income streams and protect against periods of slow growth.
- Form an alliance – this can help you capitalize on two separate skill sets to reach new clients. It is especially effective for small businesses that want to expand into new areas, but lack the infrastructure.
Stay True to Your Vision
When you started your business, you had a vision. It is important to stay true to this vision. Think about what you intended to achieve and monitor the expansion to make sure you don’t lose sight of this goal. It’s easy to get excited about new opportunities and new markets, but the danger is that you will become overexposed and vulnerable to adverse market conditions.
Be sure to look after yourself during periods of business expansion. Your plans will come to nothing if you burn out along the way.