“Chance favors the prepared mind.“ – Louis Pasteur
A storefront just next to yours has just come up for lease… Personal obligations have left you without the ability to fulfill client needs for a week or more…
A competitor is expanding their services or products, and customers are drifting away from your business…
Small Business Expansion
There are many prompts that cause small business owners to consider expanding operations, but how do you know when the time is right?
The first thing to realize is there is no right time to expand. That is to say, there are only better or worse times to make the move. Different types of expansion will introduce different concerns. Adding a new product line carries a different set of risks than bringing in new employees, for instance. To complicate things, one type of expansion may end up necessitating another. Just as no two businesses are the same, no two expansions will be the same either, but there are some general rules that will help you know when the time is right.
Seneca said, “Luck is what happens when preparation meets opportunity.”
Are you prepared to take advantage of an opportunity when it presents itself?
Getting a Wider Perspective
Small Business owners often feel as if they inhabit a world apart from their clients and vendors. Instead of suffering this gap, you should make an effort to close the gap before you make major decisions about expansion. For the big picture, check out consumer confidence measurements for the nation and your particular demographic. The old adage about it being easier to keep a customer than to get a new one is also worth remembering. Informal and formal surveys can be used to gauge reactions to your expansion before you take the plunge. Though typically limited to informal chats, vendors can also provide information on market changes and the steps being taken by businesses similar to your own.
Preparing Your Small Business for Capitalization
Adding space to your business, paying extra salaries, or purchasing new equipment can all require the need for investment capital. A great credit score and/or significant assets will secure good lending terms, but you also need to address the risk of the investment from a personal point of view. Do not trust the bank’s assessment alone. After all, they have recourse in case of default.
The basics of risk assessment are to know exactly how much money is needed to support your expansion, whether the market will support your expansion, and over what time frame you expect to repay the loan. You will also need to answer a couple of questions to your own satisfaction.
- What could change in the market to reduce income from the expansion?
- What is the likelihood of any of those changes occurring?
Preparing Your Small Business for the Worst
Every business (small or large) needs an emergency fund for the same reasons individuals need them. Bad things inexplicably happen sometimes, and people are prone to errors in judgment. An emergency fund capable of covering a month or more of expenses can save your business or, in the worst case, allow you to bow out gracefully. A high-risk expansion and little emergency planning should send up warning flags, leading you to further preparation.
you should avoid growth for growth’s sake. Expanding operations often means more work for the owner, not less. However, sometimes reliable indicators and perfect opportunities appear together. Remember what Louis Pasteur said, and then when an opportunity too good to pass up appears, you should already be prepared to grab it.
About the Author:
Janet Schmidt is a business-savvy freelance writer, who offers advice to small business owners. If you are interested in learning more about running a business, Janet recommends visiting this website to get more info.