When is it Time to Expand Your Business?
Things are going pretty well, but does that mean you should expand your business? There are countless factors that go into building out your small business, so how are you supposed to know which of them is the right trigger for business expansion? Expanding isn’t rocket science, but it still has a pretty intricate formula if you want to make the right investments. Business expansion doesn’t always mean opening up a new location, it could also mean expanding your staff or offering new products or services.
This isn’t a definitive list of requirements to expand your business, because economic factors vary, but think of this as guidelines.
What You Should Have
- Regular Customers – if you want to expand your business, you should be bringing in business. Not only that, but they should be returning customers. If you’re thinking of opening up another bakery, you should see familiar faces every day, and if you’re a marketing agency, your clients shouldn’t be returning for multiple campaigns. The more customer retention you have, the better an indicator it is that you’ve really got something good going.
- Regularly Increasing Profits – You should be making a profit if you want to expand your business. Ideally, you should be making enough profit on your own to sustain the business expansion, because that’s what’s going to happen while you’re preparing it. Keep an eye on your business’s net income, and if it’s steadily increasing over a long period of time, then it might be time for expansion.
- The Industry is Growing – you might be profitable and have a lot of customers, but if you’re in a stagnant industry, it might not be the best idea to open up another location or expand your operations. Some good things can’t last, and if it seems like your market sector isn’t projected to grow, a business expansion might not be a good investment. Check on industry trends and stocks in your sector regularly.
- Too Much Business – ideally, you should be having so much business that one location can’t meet all the demand coming in. You either don’t have enough room, resources, or staff to handle it all. Intuit says that “an excessive workload isn’t just a sign that you should grow; it’s a sign that you must grow. Trying to press ahead without expanding your staff could cause quality, consistency, or deadlines to slip and send your business in the other direction.”
What You Should Consider to Expand Your Business
Do customers want you to grow? Explore your market – check out your Yelp or Google reviews. Does it seem like your customers want you to expand your business? Do they spread the word about you? Is there a lot of traction and hype surrounding what you’re doing? If there’s a lot of talk around town about your business, that’s a good sign your customer base would quickly take to another location, or you’d gain more customers by doing so.
Forbes says, however, to be wary of sudden and inconsistent spikes in customers – “If you see a sudden surge, don’t take that as your cue to expand your business immediately. Your increase in customers might be due to business seasonality or another market fluctuation. Wait a bit to see if your increase in customers is consistent or temporary.”
Keep track of what your customers are asking for and requesting, this way you’ve got an idea of which investments to make.
Can income from one location support others? This is pretty important, because as mentioned, it’s probably what has to happen while you’re preparing to open another location or expand operations. Expanding, in a way, is like starting over again. You’re new location won’t be making a revenue for a while, and so you’ll have to prepared to support the entire cost of it.
What’s your location like? If you want to open another location, where do you plan to open up? Have you looked into demographic data, and does it match that of your original location? Has there been talk in this area about a need for your business? There are all geographical factors to consider because let’s face it, it’s all about location these days. You need to make sure you lock down a location with enough in common with your original that it can sustain your vision or continue to bring people in.
Is there more work than you can handle? If you haven’t really considered business expansion, but have had trouble keeping up with demand, this might be a good time to start thinking about it. Saying “no” to business isn’t fun, and you know you’re losing out on money. In order to capitalize on those opportunities, it might be a good idea to look into expanding your operations or opening another location. This way, you can get the most out of what you do best, which is what you offer your customers.
Is your staff ready to support other locations? Will you have to put other operations on hold? Chances are you’ll have to hire more staff once you expand, but if you have certain staff members dedicated to certain back-of-house operations, will they be able to take on a higher demand? Consider this before you ask your staff to take on new responsibilities.
Interested in learning about financing options to expand your business? Or if business expansion is right for you? Consider FaaSfunds – talk to one of our financing experts, or sign up for our business credit monitoring platform today.