Knowing when it’s time to expand your business
From the minute you have that lightbulb moment and decide to embark on the challenge of start up your own venture, the business is expanding all the time. From every new contact you make, each new customer you attract and every skill you acquire, your business is constantly growing. However, more sizeable expansion milestones such as multiple offices and employee recruitment take a little more time and consideration.
Small business expansion is something that should absolutely be celebrated and we’re certainly not trying to put the mockers on your admirable ambition. What we are trying to do here is show you that big decisions like these need to be thought through and thought through extremely thoroughly before agreeing to any new T&Cs.
Micro-businesses often start out as a one-man-band or with a minuscule workforce and then work tirelessly towards growth and development. This process of progression can include anything from the enrolment of a new admin assistant to the development of a mobile-friendly web application or a brand new operations base overseas. Whatever your expansion plans entail, getting the timing right is absolutely crucial, so here are our tips on knowing when it’s time to expand.
First and foremost, reach break-even
Any respectable business expert will tell you that the most important milestone to reach before letting the idea of expansion even enter your mind is the break-even point. When you have reached the point when your costs and expenses are equal to or less than your revenue, then you’ve cracked the first big challenge of your small business mission. Attempting expansion any time before this is extremely risky for a business in its financial infancy and would almost definitely spell trouble for your vulnerable enterprise.
Expanding can involve additional employees and additional working locations and with this exciting prospect comes increased financial obligations. Ensuring that you have the economic security to cover factors like wages, rent and the cost of dealing with more complex accounting, payroll and supplementary liability insurance is paramount.
Develop your professional toolkit
So when you’ve developed a strong client base and are successfully cultivating a growing customer audience that has enabled you to hit the all-important break-even target, it could be time to expand. Attracting more and more custom to your services or products is fantastic – it’s the dream all business owners are chasing on a daily basis – but it’s important to recognise when you need to take it up a notch so as not to compromise on quality.
An increased portfolio of clients means you might need more staff to cover the accounts and ensure that the service each customer is receiving is of the highest possible standard. Similarly, if you have reinvented your product to complete in the ever-evolving marketplace, you may now need more advanced facilities in order to efficiently cater for this development. For example, if you have decided to import and export new products then you will likely require more space to store stock and an international office with more employees. Providing you have access to the financial means to back this development then as the saying goes, if you’ve got it, flaunt it!
Customer needs and the competition
Having the means to expand your business should never be about vanity. Sure, you should be proud of your achievements and bask in the glory of your own success but undergoing costly developments just because you can will end in tears further down the line. Instead, closely analyse the production demand of your customers and keep a close eye on the consumer behaviour of your market demographic and your competitors. This will give you a much clearer idea of if and when the time is right for you to consider expansion.
If your customers are getting a sub-standard service or are heading to your competitors in favour of their new product development then it’s time to go back to the drawing board. Customers are constantly on the lookout for the next best thing and you need to make sure that you give it to them or there will be somebody else who will. If this means an expansion of your workforce or operations then by all means, set the wheels in motion.
The last ditch attempt syndrome
Another important factor to be wary of when contemplating expansion is falling victim to the common ‘last ditch attempt syndrome’. The symptoms of this are a stagnant or failing business and sheer desperation to do absolutely anything in your power to remedy the situation. Pouring all of the cash you have managed to painstakingly accrue into a rash expansion project isn’t necessarily the answer for every business however. In this circumstance, the business will be precariously teetering between make or break, so consider more economical options such as retraining existing staff before signing on the dotted line.