One goal for many small business owners is getting to the point where you are confident enough to expand your business. Expansion may mean different things to different businesses. It could mean opening multiple locations, hiring more employees, moving into a larger space, or something else. Whatever expanding looks like for your business, it is important to be prepared for the jump and take full advantage of the opportunity.
Expanding a business generally involves gaining additional customers and managing more activities. This could require you to add staff, purchase additional inventory, or increase production, which could in turn create a strain on cash flow. Because of this, expansion efforts typically require working capital – just like when you started your small business.
Here are six tips to keep in mind if you’re considering expanding your business:
1. Build from a solid foundation. Getting your systems and procedures in place is an essential part of supporting growth. Analyze what currently works well in your business, as well as what is creating bottlenecks and problems. Take time to understand how well you are serving your current customers. Don’t be afraid of constructive criticism from customers and employees. It is also important to have steady cash flow. In most cases, you don’t want to invest in growth until you have proven your profitability and have a good handle on your cash flow so you can be sure expansion will not suffocate your business. A basic rule of business to keep in mind is that growth consumes cash, and fast growth consumes cash fast.
2. Evaluate your business. One of the most important management skills for small business owners is learning how to “pivot”. When you enter your market, you have an idea of what your customer wants. However, you really won’t know what works best, until those customers are buying and are happy with their purchases. In the process, you will likely find that some things require changes. Perhaps you will decide to eliminate some of your offerings because customers aren’t responding to them in the way you thought they would. Or, maybe you will decide to offer some additional products or services that you hadn’t considered before. Be ready to adjust your business plan to maximize your strengths and in-demand offerings. The more profitable your business, the better position you are in to expand. Remember that working capital is your most important resource when you’re looking to grow your business.
3. Utilize your customer base. It is tempting to think of growth as coming primarily from new customers, but your existing customers can provide priceless market information. Don’t forget about them as you set out to add new customers. Remember, it’s the loyalty and support of your existing customers that allows you to consider expanding in the first place. The good news is that today’s digital environment provides many efficient ways to gather the customer intelligence you need. Seek feedback from your customer base using surveys, online reviews, and social media. By better understanding the needs and wants of your customer base, as well as their current level of satisfaction with your business, you’ll be in a better position to make informative decisions about expanding.
4. Develop strategic partnerships. Once you have achieved profitability and market presence, look for potential partners. Referral marketing and strategic partnerships are cost-effective ways to tap into new customer groups. For instance, if you are selling sports-related items, you may try seeking out a health store or gym to work with for marketing promotions or other activities. Potential relationships are endless and don’t necessarily need to be directly related to your specific industry. Remember, someone who gets their hair done still needs landscaping work on their home. Expanding often involves creating a presence in your area. Partnering with other local small businesses can aid in this and help introduce you, and your potential partner, to new customers.
5. The make or buy decision. You may reach a point of success in your small business where it is easier and faster to buy out a competitor or a business with a complementary offering instead of growing that segment organically. This is an effective strategy often used by larger companies. Done correctly, it can be just as powerful for smaller companies. If this seems like a good option for you, approach any acquisitions or mergers with great care. You must ensure that the process will not detract from your current business momentum and you’ll also want to be sure that your existing business and the one you purchase can ultimately operate as one.
6. Invest in resources. Another vital element of long-term success is investing in the right advisors. This includes professionals such as your bank, accountant, and financial planner who can assist you in managing the new challenges that come with business growth. They can also assist you in determining if you’re ultimately ready for expansion. Having trusted business resources outside of your internal team can give you a different perspective as well as critical expertise.
Small businesses measure success in many different ways – which is why expansion can look different for every business. No matter how you see success as a business owner, taking an overhead look of your company can help identify your strengths and weaknesses, and prepare your business for further growth. BankFive is committed to helping our small business customers successfully grow and prosper. Contact our Business Team today to learn more about how we can help your business secure the financing needed for expansion opportunities.