Running A Business

When to Start Expanding your Small Business

Jan 31, 2019 • 10+ min read
Table of Contents

      Think back to your business’s early days, when it was just you, an open Word document, and a blooming idea to build something great. When your business was just starting, it likely became apparent quickly when it was time to expand: you needed office space, extra help, a decent computer, and other resources. Expansion made sense — without it, you couldn’t get the business off the ground. But when your business is further along, it’s not always so obvious when you need to invest capital into expansion.

      Before you consider whether or not you want to expand your small business, it’s important to view expansion in the right context. It’s not all about money, money, money. Yes, successful growth does lead to increased revenue, but business development leads to so much more. Think bigger. Think more customers, locations, and employees. Think higher-quality products, improved customer experience, and innovation. Sometimes, you expand your business to seize an opportunity. Other times, you expand to guarantee survival.

      Take a look at these 9 signs and decide if it’s time for you to expand.

      Your Customers Demand It

      Talking to a customer

      When your customers start asking you about new locations or products, it’s time to begin thinking about expansion. If your customers travel a long way to visit your restaurant or retail site, consider opening a second location. Do some research and discover if you have a viable market where you can continue growing the business. J-Dawgs, a popular hot dog chain in Utah, provides a fantastic modern case for doing this right. The original hot dog shack was excelling, so the company expanded to another hot spot. Then, after both locations flourished, the business continued expanding. Now, they have 7 successful hot dog shops serving up delicious Dawgs all across Utah. When customers demand it, you have a strong argument for expanding.

      Another excellent way to grow your business is to give your customers the products they want or need. Take Apple, for example. They started with the Mac but then went on to create iPods, iPhones, iPads, TVs, monitors, watches, headphones, and more. Or Amazon, who started as an online bookstore and expanded to become the world’s powerhouse technology company in e-commerce, cloud computing, and artificial intelligence. Consider what else your business could offer your loyal customers. Have a bar that only sells drinks? Maybe expand your menu to include a few simple appetizers. Own a social media management business? Maybe hire additional help to provide email marketing or SEO to your list of services.

      Space Is Getting Tight

      Women shelving products

      Whether you’re working in an office, a restaurant, or a manufacturing facility, you need enough room to operate comfortably. If your waiters are tripping over each other or your employees are scrunched desk-to-desk, then you may need to expand. These close quarters could mean purchasing a new space, building a second location, or renovating your existing site. Be thoughtful about the decision to lease a larger space or purchase another location. Do you need to expand? Is growth consistent or is the tight capacity due to seasonal trends? Will the expansion lead to improved customer experience or employee work environment?

      If you decide to move forward with expanding your business’s real estate, make sure you pace yourself. Don’t get too enthusiastic and put your business in a tricky situation. Anticipate your business demands in the coming years and do your best to find a space that’s just the right size — neither too big nor too small. Too big, and you’ll waste valuable money on unused space. Too small, and you may have to expand again sooner than you’d like.

      You Have Too Much Business to Handle

      Too much business isn’t something most startups worry about (mo’ business, mo’ better, right?), but it can become a massive issue for rapidly growing companies. If you’re working long hours or turning away customers due to bandwidth, it may be a good time to expand your business.

      If you operate a food truck and your lines always stretch around the corner, you could much better serve your customers by adding another truck. Or if clients are knocking at your door and you’re telling them to jump on the waitlist, you could grab the additional business and build your clientele by hiring some extra help. Too much business is the perfect excuse to expand your company — just make sure it’s not a seasonal fluctuation that will leave you overstaffed once it’s passed.

      Growth is terrific, but good, sustainable growth is much better. It’s much harder to grow well than it is to just grow.
      — Brian Hamilton

      An Opportunity Surfaces That’s Too Good to Pass Up

      Couple in their cafe

      Sometimes you’ll need to expand your business to seize new opportunities before they pass you by. When a brilliant piece of real estate opens up in a competitive part of town, a chance for an advantageous presents itself, or when there’s a shocking sale on necessary equipment, you may need to grow your business faster than you’re comfortable with.

      Remember: rarely does a plan go according to plan. Be flexible and willing to change direction when opportunity comes knocking. Seldom will an opportunity arise when you’re comfortable and patiently waiting (wouldn’t that be nice?). More often than not, it’ll come at an inconvenient time, forcing you to make some hard decisions. Analyze the situation and see if expansion is feasible and right for your business, and if it’s right, seize the day before it’s gone.

      You Don’t Have the Skills to Get the Job Done

      Man on the phone looking at paperwork

      A good time to grow your business is when you no longer have the skills to get the job done. Now, don’t take this personally. It’s a natural part of a business’s life cycle. As a skilled mechanic, you may possess the expertise to fix up any vehicle without a problem, but you might not know how to perform accurate accounting or payroll.

      A perfect example of this strategic growth in action is in the early days of SendGrid, a digital communication platform. Isaac Saldana and two co-founders started the company, and although Isaac had amazing technical talent, he didn’t have much executive-level operating experience. Eventually, the time came when Isaac realized his greenness was slowing the company down, so he made the tough decision to hire an experienced CEO. Once the new CEO came on, the business took off, and Isaac was able to have a more significant effect on the company by focusing on what he did best — the technology.

      It’s a hard balance with the entrepreneur journey. Sometimes, the right answer is to embrace the challenge, develop new skills, and get by. Other times, it’s best to avoid your weak areas, hire the right help, and focus your time on what you do best.

      I figured out on the first business that we needed a great team to make technical things happen. On the second business, we got funding, and the combination of a great team and funding made a big difference.
      — Isaac Saldana

      You Find a Golden Product-Market Fit

      Woman holding basket of bread

      When it’s right, it’s right. If you find the perfect product-market fit, you can’t afford to wait and see how things play out. You need to fire all cylinders and go for gold, like with the electric scooters that seemingly appeared overnight in major cities across the US (those wonderful things you’ve likely tripped over more than once).

      Bird launched in September 2017 in Santa Monica, and the scooters were an immediate hit. Twelve months later, Bird has grown to over 100 cities, facilitated over 10 million rides, and become the fastest startup to achieve a $2 billion valuation. Those milestones could never have happened if Bird played it safe and took things nice and slow. You don’t have to wait until you’re seeing big profits to expand your business — you just need a golden product-market fit and the capital to grow quickly.

      You’ve Gotten Too Comfortable

      Woman leaning on cafe counter

      “Complacency can be the single most dangerous threat to any business,” said Chris Ruisi, Founder and CEO of The Coach’s Zone. “Like runaway tree roots, complacency takes hold of an organization’s culture, and the worst part is, in many companies, leadership is either slow to recognize it or does nothing to stop it.”

      Your business can’t be stagnant — it’s either progressing or declining. Complacency doesn’t just restrict improvement and growth; it breaks what already exists. The hardest part is recognizing when the roots of complacency are sneaking into your business. If you’re hearing, or saying, common phrases like “if it ain’t broke, don’t fix it” or “it worked fine last time,” then you need to start looking at ways to expand your business. To avoid slipping backward, you need to make sure you’re always doing something to push ahead. Avoiding complacency is critical to any business’s long-term survival.

      You’re Relying on Golden Geese

      Man doing inventory

      Your business may be sitting pretty right now, making consistent cash flow month after month, but do you know where the money is coming from? Often when businesses take a closer look at the financials, they find a large percentage of their revenue comes from a single golden goose, and this can be extremely dangerous.

      “One of the largest flags for a business development individual/team to have is when a large portion of revenue is coming from a single account,” said Jared Shaner of Trellis. “This was the case when I first joined the team at Trellis, with a single account representing over 30% of our revenue (we eventually lost it).” You can imagine how much impact it’d make on your business if you lost 30% of your total revenue overnight, but many companies still seemingly put all their eggs in one basket and risk calamity. If you find your business’s survival is reliant upon golden geese, then it’s time to expand your business and diversify your customer base.

      You Have Money in the Bank

      At work in the cafe

      Yes, it’s important to keep a cushion of cash on hand in case of emergency, but too much money sitting in the bank does no good for your business. A good rule of thumb is to safeguard your business from cash-flow issues by maintaining an account balance comparable to about two months of operating expenses. Beyond that, use your extra capital to invest in growing the business: make timely repairs, replace outdated equipment, invest in real estate, hire talent, improve marketing campaigns, and the list goes on.

      Saving cash is like saving a legal pad — it’s worthless because money, like any paper, is only good when it’s used. If you leave money in savings too long, it disappears. Money, like any paper, is only good when it’s used.
      — Grant Cardone, Self-Made Millionaire

      Okay, that quote by Grant may seem a bit extreme, but it illustrates a valuable point. Money sitting in the bank doesn’t do your business any good (except for the safety buffer). Think of ways to grow your business and get that cash working for you.

      Growing your business takes a lot of time, research, hard work, and capital, but choosing not to expand your business isn’t a sustainable long-term strategy. If you’re witnessing any of these 9 signs with your company, act now and begin the expansion process. Some of these signs will leap out and hit you in the face (quite literally in a tiny office), while others will require you to dive into the details proactively.

      Be careful not to get caught up in the excitement. If you push your business too soon, you might not have what it takes to survive. That said, these signs are a great indicator your business is ready to grow. Watch for them, and when the day comes, be confident in your decision to start the next phase of your company’s journey.

      About the author
      Jesse Sumrak

      Jesse Sumrak is a Social Media Manager for SendGrid, a leading digital communication platform. He's created and managed content for startups, growth-stage companies, and publicly-traded businesses. Jesse has spent almost a decade writing about small business and entrepreneurship topics, having built and sold his own post-apocalyptic fitness bootstrapped startup. When he's not dabbling in digital marketing, you'll find him ultrarunning in the Rocky Mountains of Colorado. Jesse studied Public Relations at Brigham Young University.

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