In a nutshell: If you want to take your business to the next level, make sure you’ve got your marketing plan, finances and employees figured out first.
Nothing breeds success quite like success. But if a business owner wants to build on success and expand operations, it’s time to stop and take inventory on a few issues.
In short, look before you leap.
Considering whether to “go big” and expand a business may be one of the toughest decisions a small business owner faces. It can come in many different forms. Some may consider expanding their line of products and services. Others may want to extend the geographical reach of a business, adding locations.
Whatever the case, the following three questions can help a business owner decide whether it’s feasible — and even when it’s time — to expand.
Is Your Marketing Plan Updated?
Much like an initial business plan for start-ups, a detailed marketing plan is needed for a planned expansion, according to the U.S. Small Business Administration (SBA).
It should include the following:
- Ways to identify key customers and current revenue streams
- A defined value proposition that separates your company from competitors
- A focus on promoting the key strengths of your product or services
- Research on your competitors to see how they have positioned themselves in the market, and how they are doing things better than you
- Potential sources of revenue that can elevate your company beyond the current revenue streams.
Essentially, establish where you are before moving forward. The plan should also include an evaluation of market conditions, your current position in the market and the steps needed to expand your position.
Do You Have the Money to Expand?
When it comes to expansion, the old saying, “You have to spend money to make money,” rings true. To expand a business requires a commitment of resources, and resources cost money. Depending on the size of the planned expansion, it could be a great deal of money.
That’s the part that must first be quantified: the cost of the expansion. Coupled with this would be a detailed look at your cash flow. Finally, it’s necessary to make a projection of future revenue (not overly optimistic or pessimistic!) should you go through with the expansion.
This can get tricky. Sometimes, a business owner’s plan for expansion outpaces the cash flow needed to justify it. But don’t disregard the numbers. If things don’t add up and you must seek money to fund an expansion, there are options. They include bank loans, SBA loans (they can cover up to 90% of your loan with generous terms for paying it back), crowdfunding, venture capitalists, and even your own friends and family.
The point is: Do the math down to the penny, or as close as you can get. This is not an area where you want surprises.
Do You Have the People on Board?
If you haven’t already done so, now is the time to seriously invest in talent within your company. The persistent myth of the lone wolf entrepreneur is just that — a myth. It’s impossible to expand a business into a larger operation and expect to do everything yourself.
The key here is to look for quality, not quantity. One key hire can change an entire operation, including making it easier for an owner to focus on overall strategy. Think long term. Real growth takes years, not just a few months. And it takes quality people to drive growth.
Look for candidates who can fill a position and remain with the company for an extended period. You’ll need good compensation and benefits to stay competitive with other employers. Here are some other issues to keep in mind.
- Always search. The market of available people changes from week to week. It’s important to stay on top of who is available.
- Take your time. Don’t bring someone into any position — but especially one at the management level — without thorough consideration. That includes checking resumes and references, and conducting a thorough interview.
- Fire fast. If someone is a bad fit, they must go quickly. Bad employees create a bad atmosphere, poisoning the attitude of other employees and harming productivity.
- Find a good fit. It’s relatively easy to quantify someone’s skills and knowledge to handle the practical aspects of a job. It’s far more difficult to find someone with the right soft skills who will work well with you and fellow employees. This proves especially important for those in management positions who will carry out your vision for the company.
Take all these factors into account before committing to expansion. It’s a bold move to take a business to the next level, but it’s also the right one if the proper preparation is taken before making the big leap.