As a small business owner, it might feel like you’re falling behind the competition if you’re not constantly growing and serving new customers. In today’s culture of data and heavy rivalry in nearly every industry, this fear is never far away for some.
You may have had a string of successful seasons or years and feel like now is the time to make the next big move for your business. Expanding your services or opening a new branch might be an option, but a hasty decision can affect your business’s reputation, employees’ lives, and your financial future.
Small businesses are the backbone of America’s economy, and we all want to see our country succeed. When a business wants to expand, a thorough, objective analysis of the entire organization is essential before making any commitments. Here are a few important factors to keep in mind before you expand your small business.
1. Does your industry show promising growth?
Consider the overall, long-term outlook of your industry and geographic region, not just the past few seasons for your specific business. Are there other companies like yours competing in a small area? Do you offer products or services that truly make your business stand out? Just because your organization has enjoyed recent success doesn’t mean that something else in the area won’t come out on top. If you find that long-term industry growth isn’t probable or likely, expansion might not be the best idea at this time.
2. Can income from one location support the whole enterprise?
Analyze your revenue to determine whether you have the long-term potential with abundant growing profits to secure an expansion, but think beyond the first few months or years of operation. Regardless of how you expand, you’ll likely have a slower period while you train employees, advertise, or establish your development.
You’ll need to financially support your business while your funds are reallocated and stretched thin, so your current setup should generate enough revenue to support all locations, ventures, or employees for a period until the expansion is fully up and running.
A staggering 30% of businesses fail due to running out of money. A line of credit or another form of small business loan can help you out in slower periods, but your enterprise should more than support itself before you expand. This crucial early phase of an expansion can affect your older enterprise if you’re not properly deployed and prepared for fluctuating income.
3. Has your business created a buzz?
If you have die-hard customers who can happily help you along by spreading the word about an additional location or by eagerly trying extra services, you’ve already overcome hurdles in marketing and promoting the new establishment. Conversely, if you have nothing unique to offer in a sea of similar competitors, opening a new branch can lead to oversaturation and even cause your locations to compete against each other.
4. Do your customers ask for more?
Return customers are a great sign that your organization is doing something well. But if your clients rely on your product so heavily that they’re asking you to increase your offerings, hours, or services, you may be able to generate more business with an expansion.
Take note of what visitors or callers ask for when inquiring about your business, especially if you don’t currently offer the specific services they’re requesting. Could you accommodate them while creating an efficient, profitable system? Ask current clients if they’re excited enough about your offerings to visit a separate location or try a different product–your existing customer base can be an excellent source of market research to help guide your decisions and offerings.
5. Is staff ready to support all existing services or locations?
If expanding your business means putting your old establishment, services, or location on hold, growth might not be the best option. Developing an efficient system of production, no matter the industry, takes time and energy, and hiring the team to perform these tasks is no small feat. Your expansion may not turn a profit for a long time.
If you can feasibly take the time and money to divert your attention to staff and facility development, make sure to do so before your expansion is up and running. Business growth can be enormously expensive and risky, so consider focusing on your most profitable venture if you’re not ready or are still undecided.
Expansion can lead to new opportunities, increased profits, and higher visibility, but it clearly comes with risk and uncertainty. Carefully consider all of the pros and cons of an expansion, and use caution when venturing into new areas.