When entrepreneurs lay the foundation for their business, they often have a mental list of short and long-term objectives that they hope to achieve. Once a business starts to do well, it becomes important to plan for the road ahead. Not so fast. Are you really ready for business expansion? Here are five questions to ponder on whether it’s time to expand your business.
1) What’s Your Strategy?
Without a strategy, your business will function like a ship without radar. No one can move ahead if they are directionless. You need to chart out a proper path at the time of starting your business – a vision for you to navigate towards a certain goal as you lead your team. A robust strategy will help your company weather the toughest of storms.
What did you have in mind when starting your company? Did you create it for short-term benefits, to be sold off 5 years later? Did you want to keep investing and let it grow for another 50 years? Whatever your strategy, you will need to keep coming up with new, high-quality and innovative products to diversify and keep investing in the key areas accordingly.
2) What Locations Are You Considering?
Apart from striking at the right time, striking at the right place can also have positive implications on your business’s success. When making a decision about which location to grow in, consider the following:
Have you considered the locations where you stand a good chance to succeed after expansion?
Do you plan to expand within your community/country or plan to go global?
Is there enough demand for your product/service in the region you plan to expand in?
You will obviously need a space where you can operate from. Considering that, should you look to lease or buy new property?
Which available offers from the various commercial real estate companies in the location you’re considering are most suitable to you?
Will you be able to manage your second office from your current location?
3) Can You Finance It?
Ideally, you should expand if you can answer the following affirmatively:
Do you stand to gain financial benefits from the expansion?
Do you have the kind of working capital that will support the additional investment?
Will you be able to fund new facilities, technology, human resources and additional inventory?
Expanding your business operations may imply that you will have to take out loans from a bank. You, therefore, need to ensure that your new venture allows you to generate enough profits to repay the loans. Being debt-ridden can spell doom for your business. Make sure you expand only when you’re confident of earning financial benefits from it.
4) Do You Have the Technology?
Having your systems and processes in place at your current office before you start a second venture will be crucial to the smooth functioning of the latter. To ensure a problem-free expansion, get the necessary online/offline technological resources sorted out. This may include installing software related to functions like accounting, invoicing, marketing, administration, and so on. When it comes to machinery and equipment, you will need to not only install the best, but also maintain them in the best way possible.
5) Do You Have Customer Support?
Natural and man-made calamities, ongoing recessions, and other such events in different parts of the world can have a significant impact on the demand for your product/service. In such scenarios, it would be nice to have a financial cushion (cash reserves), which can support the expansion even when the customer demand is low. Furthermore, you will do well in making sure that your product/service fits into their limited range of consumption during such times.