Your business is profitable, and the demand is strong for your services. The future looks bright. Is it time to expand? Part of the answer depends on intangible factors such as your vision for the company’s future and your personality traits.
For instance, if you hate to travel, expanding the business’s physical presence into a different geographical market could lead to burnout and an ultimate lack of success. But taking on a partner, merging with a rival, or purchasing an existing firm in a complementary niche market may be expansion alternatives that are suited to your strengths.
Here are three important questions to consider when you’re thinking about expanding your business:
Expansion costs could include increased inventory, a larger facility and more equipment. After assessing your current financial situation, you may determine cash on hand can cover some or all of these costs. If not, you might be able to raise the required cash by tightening your receivables cycle along with improved collections. Perhaps your vendors will offer flexibility in extending payment terms and credit availability to ease cash flow problems caused by upfront costs of growth. If additional financing is required, think about your comfort level with taking on debt or giving up part of your equity. Balance emotional aspects with the realization that prudent borrowing can benefit your business by providing liquidity to grow your income. Likewise, investors who supply cash in return for a stake in your business may also be a source of sound advice and managerial guidance.
Payroll can be expensive and paperwork intensive. But sales, marketing, business development, operations and administrative tasks will expand along with your company. Make a realistic judgment of how much of the increased workload you’ll be able to handle yourself. Remember that the right personnel can boost sales and add to the bottom line. Alternatively, hiring temporary or part-time employees and independent contractors can keep you from becoming overwhelmed while holding costs in check. Cultivating business contacts and joining industry associations are inexpensive ways to tap expertise. Outsourcing functions such as website maintenance or marketing gives you access to professional skills.
Financial projections can help you determine whether sales and profits will make the expansion worthwhile. But also take into account why you started your business and what customers expect from you. Providing personalized service may prove difficult as your business grows, making customers unhappy. Yet choosing to remain static exposes you to the risk of competition from larger companies or losing customers as their needs outgrow your capabilities. Expansion decisions present both challenges and opportunities. Call today for help planning for success as you’re working through the financial steps of growing your business.
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