When you start a new business, the ultimate goal is to be successful and expand. Growth is the natural order of successful businesses, and it’s what every entrepreneur shoots for. However, when the time comes to actually expand, it can be difficult to pull it off. There are always growing pains that will come with every expansion. Here are a few things for you to consider when you are expanding your business.
Do You Have the Right People in Place?
One of the most important factors of expansion success is your people. Do you have the right people in place to be able to expand? Look at each one of your employees and figure out if they will be able to grow with your company. If they do not handle stress well, and they are already having problems, they may not be able to handle an expansion. Before taking on this endeavor, it is important to evaluate each individual employee to see if you’re in good shape.
Can You Benefit From Economies of Scale?
In many cases, business owners only think about the negative cost implications of expansion. They think that it’s going to cost a bunch of money to be able to expand, and they are nervous about the consequences of doing so. However, many times, you can benefit from economies of scale. For example, if you expand your business and start buying more from your suppliers, would you be able to qualify for a volume discount? Could you share some warehouse space with another business to save money on the expansion? There are all kinds of economies of scale that could stand to benefit you in this situation.
Does the Market Justify It?
Instead of just looking at your own business, you should also look at the market as a whole. Does the market justify expanding your business? Is there room for growth in the market, or is it pretty saturated as it is? You can’t just look at everything in a vacuum. You have to look at things from an overall standpoint. If the market is poised for growth over the long-term, then you’ll be able to justify the expansion.
How Will You Finance It?
Another important factor that you have to look at is how you will finance the expansion. Do you have enough money internally to finance the project, or are you having cash flow problems? If you don’t have enough money internally to pay for the expansion, you will either have to seek out investment capital or borrow the money from a lender. Either option comes with some pros and cons to look at. With investors, you then have to share your profits and listen to their input. With debt, you have to pay it back and make monthly payments with interest.
No matter what type of industry you are in, expansion has the potential to help you be more successful and make more money. There will always be bumps in the road during an expansion, which requires a lot of planning on your part. As long as you are flexible and willing to learn from your mistakes, you should be able to get through the expansion with minimal headaches. Just let your employees know of your intentions before you start the process of expansion.