When to expand your offering is an inevitable question when you’re growing your business. Adding new products or services to your range, or opening in more locations, will invariably mean extra complexity, but also brings with it exciting new challenges.
The prospect of expanding early on can often seem daunting to a small business, but it also represents a prime opportunity to grow – and to get a head start on competitors in the same market.
Here are some questions to ask yourself before you start executing your expansion.
#1 Is my cash flow positive?
Cash flow is one of the biggest challenges for small businesses. Products or services that are selling well and making you profit are crucial building blocks to have in place before you start expanding.
Regardless of the capital you’re raising, expanding without a regular income to make day-to-day payments such as suppliers’ invoices or business services can quickly lead to financial difficulty. Make sure you’re managing cash flow in a sustainable way before you put your expansion plan into action.
#2 Will I have customers?
Getting it right once doesn’t necessarily mean that you’ll get it right again and again. Whether you’re adding new products to your line or opening a second location for your business, you need to be confident that there’s appetite for it.
Some established businesses use crowdfunding campaigns for a new product line or site in order to test the idea with their market. If your plan is to launch a new product in your range, test the market and refine the idea by speaking to existing customers. If you’re looking to open a new branch of your shop or restaurant, look hard at the areas you’re considering. Look at factors like how much competition there is, footfall, and the types of customers in that area. It might be that the market in this new area is slightly different to your existing sites, so you may want to consider tweaking your business model to better suit the new client base.
#3 Have I got the right team in place?
Expanding a business invariably means bringing on more staff to handle the extra workload. Having people in place with the right expertise, who understand your business goals and ethos is crucial to getting expansion off on the right foot. Be prepared to invest time in hiring, especially into key management roles; look for candidates with experience of the market you intend to expand into.
A larger team also brings new opportunities for you as a leader. For example, communication throughout the company is a more complex challenge the more people there are involved, particularly if you’re spread across more than one site. Be conscious of forward planning regular internal team meetings to ensure everyone is on the same page and working towards the same company goals.
#4 Can my suppliers handle it?
Expanding has an impact on everything connected with your business, and fully understanding the implications is crucial to making sure it’s successful. Take a good look at your supply chain; do the manufacturers you work with have the capacity to deliver the new products or larger orders you need?
If not, shop around and see if a larger manufacturer is now better suited to your increased requirements, or if the best way forward is to split production of different SKUs between more than one supplier.
#5 Have I got everything in place?
Growing your business should be a marathon, not a sprint; rushing your expansion process can sometimes harm your business, so you need to be confident that the decisions you’re making will work long term. This could mean waiting a while for the right property in the right location to become available. Or having the patience to find a supplier you can trust to manage your business needs, rather than agreeing to the first offer in order to get the ball rolling.
Of course, waiting too long can hold your business back from growing, so be open-minded to opportunities that may not have featured in your growth plan. Holding off on those key decisions until you’ve found a solution that you’re completely happy with will pay dividends in the long run.