You’re an entrepreneur, so you understand that sometimes you have to take thoughtful risks to succeed. You’re considering expanding your small business but want to be smart about it, because expanding before you’re ready can have serious negative consequences. Whether you want to expand your staff, your product offerings, your customer base, your advertising and sales channels or the physical footprint of your business, here’s how to know when you’re ready to grow your business.
1. Your Bottom Line is Solid
You can’t consider small business expansion until you are consistently meeting the very basic measure of success. If your business is regularly meeting revenue and profit goals and has consistent cash flow, you can consider exploring expansion.
2. You Have a Strong Customer Base
Not only do you have the customers you need to meet your revenue goals, but you also have loyal, regular customers. That’s an indication that your business is doing what it should in terms of quality and customer care and that there is a continuous need for your product.
Be aware that sudden spikes could be caused by outside forces — be sure that your increased customer base is solid by observing at least a few months before making any expansion decisions.
3. There Is Future Potential
Not only is your business doing well, but you feel confident that this will continue. Perhaps you consistently have so much business that you’re not able to provide the quality that you want — you have long lines, wait lists or too much work for your employees. As long as this is steady (and not seasonal), you should consider expanding your business.
The performance of your industry as a whole is another important factor to consider when expanding your small business. Is there a bright future ahead or has something else popped up that could put your business in jeopardy? Weigh future prospects before you make any expansion decisions.
4. Your Customers Ask
There are a variety of ways your customers may let you know that you need to expand. Do they mention coming from a far distance? Do they remark on how crowded your location is or if they are no longer able to find the stock they are looking for? Some of these existing customers could be good resources for you to tap into as you consider expanding. They may know of new customer bases you could tap into or products that would be a hit. Get their feedback as you make your expansion plan.
5. You Need More
“More” may be different for every business, but you’ll likely know when you need it. One of the main benefits of expanding your business is the ability to have more space, more products and services or more staff to help take your business to the next level.
You may need more people because you’re overwhelmed or because you’re looking for talent with different strengths and skillsets. You may need to add offerings or advertising support if too much of your revenue comes from one product or account. Your floor may be too crowded or your storage space too packed with product. Adding more of whatever you need helps create a broader base for your long-term success.
6. You Have Money
This may seem obvious — you don’t want to expand if you don’t have the financial strength to maintain your business — but it’s more than that. If you have profits from your business just sitting in an account, that money isn’t helping you grow. Look for opportunities to utilize those funds for business growth, such as equipment sales, real estate opportunities, hiring prospects, etc.
Make a Plan
Before you jump into an expansion of your business, make a plan. Do some initial research and determine a way you can test the waters — perhaps by selling at a farmer’s market in an area where you’re looking to put a permanent location or by instituting a trial period for a new line of products.
You should also make sure you have the right team around you. Any current employees you have will be taking on additional pressure and responsibilities while you’re working on expanding, such as creating new systems, covering when you’re elsewhere or training new employees. That team also includes your team of professionals; confer with them to ensure that you have everything in order with your finances and insurance coverage to make your expansion a success. Talk with a Farm Bureau agent or financial advisor to get the support you need.