As a business owner, you will eventually face a tough decision – should you expand your operations or not. There are many things to consider before deciding to hire new staff, raise new funding, and pursue additional sales.
If you want to make an informed decision, keep reading. Some of the most important considerations to keep in mind can be found below.
Advantages of Expansion
It is pointless to gain new market share unless your profits are increasing, too. Some of the advantages offered by spending money to improve and grow your small business:
- Balanced savings in expenses gained by increased production
- Development of a new product line
- Ability to attract quality staff to help further organization improvement
- Eventually creating a public company with shares that are bought and sold on the stock exchange
- Expand around the nation to benefit from different markets
- Access to more financing
It’s important to note, so many successful brands started as a home-business. Some examples include Under Armor, Craigslist, and Spanx that all started and grew their businesses from home.
If you own a home business that is forecasting growth, you may want to move to commercial office space, especially if you hire new staff or if the business requires face-to-face meetings with tradespeople, press, or clients.
Costs of Expansion vs. Increased Sales
Expansion is often necessary to grow sales. However, increased sales may not occur unless it is apparent to customers that the business has the bandwidth to handle larger sales. A better situation is to have new sales in place and secured before expanding.
Forecast for the cost of expansion, which includes including all moving fees, leases, staffing, and increased utilities, along with other estimates if possible. Next, conduct a breakeven analysis to determine if the expansion is likely to provide the anticipated ROI.
If you plan to relocate, consider that you may lose some of your current customers and that you will have to pay more for advertising to ensure people can find your new business location.
Required Financing
Unless your business already has adequate retained earnings to cover the cost of expanding, additional capital is needed to make your growth dreams possible. Do you have a business that is financially secure with a good history of repaying loans? If so, it will be easier to secure the needed financing for your new venture. You may want to put in collateral to secure this financing, but this is something you can discuss with the lender you choose.
Securing New Vendors and Suppliers
An important part of expanding is to ensure you have access to the right vendors and suppliers who can fulfill the larger orders you will receive. This is especially important in the parts industry, where providing a fast turnaround is a must.
When it comes to expanding your business, making sure you take the right steps is essential for success. Be sure to keep the tips and information here in mind to ensure your long-term and on-going success.