Your backroom is overflowing with inventory to keep up with demand, your team is almost stepping on each other’s toes trying to make room, and customers are lining up outside the door. There are many signs that your company is thriving. But when should you expand your business?
Even if you don’t have a line around the block, healthy growth will eventually get you thinking about expansion. However, figuring out whether or not it’s the right time to expand can be challenging. Here’s what you need to think about.
When Should You Expand Your Business?
Whether your company is on a slow and steady growth path or recently faced a rapid increase in business, expansion is something that’s always at the back of a business owner’s mind. It’s exciting and represents a whole new list of opportunities, but it’s also extremely risky. If you expand before you’re ready, you could lose a lot of money and even damage your brand’s reputation in the process.
At the same time, waiting too long to expand could mean that you miss out on those crucial opportunities and start losing customers because of your inability to keep up with demand. So, when should you expand your business? Let’s dive into some key signs that tell you when it’s the right time.
Are You Keeping up with Demand?
One of the telltale signs that expansion is on the horizon is when demand begins to outpace supply. This could mean that your boutique handbag business no longer has a big enough workspace to produce enough handbags, so there’s now a long list of backorders. It could also mean that your restaurant or service business is being booked out months in advance.
Depending on your business and industry, there are many ways that high demand can impact your business. Of course, if you’re itching to expand, it’s essential that you step back and consider a few key points:
- Is this demand seasonal? Most of those handbag orders could be gifts, meaning you can expect less demand as the holiday season passes. Likewise, a restaurant may only be experiencing a temporary surge in reservations that will die down once the tourists leave for the summer.
- Are you tracking steady trends? If you’re sure the demand isn’t seasonal, is it attributable to something else, like a press mention? If it is, you might need to wait it out. Until you can see steady demand that’s greater than your current capacity, you shouldn’t plan for expansion quite yet.
- Is there another way to handle it? Even with steady demand, it’s always important to consider other solutions before a costly and risky expansion. For instance, you could rearrange to make room for a couple more workbenches or add patio seating so you can accommodate more customers. Or, you may simply need to rethink inventory management.
Are Your Employees Here to Stay?
If you manage to work through all of the above questions and you still think you’re on the path to expansion, here’s the next hurdle to get past: You have to have great staff before you take on an expansion project. Look ahead five years and ask yourself, “Are these the employees I want running my business?”
If you don’t think that you have dependable staff, it may be time to rethink your help before you take on the task of hiring and training more team members. You have to make sure your existing resources are in order and working to the fullest capacity before taking on more.
- Is your team reliable? Ask yourself if they are trustworthy, dependable, and hard workers. Also, consider their own plans for growth. You don’t want your best team members leaving for another opportunity while you’re trying to expand.
- Can they train new staff? If you are going to expand, it will take new workers, which means potentially promoting your existing team and tasking them with training new employees. You need to talk to them to see if they’re ready and willing to handle that.
Do You Have an Achievable Growth Plan?
Your business is booming, you’re running out of room, you have a great team to support you, and you know that expansion is the only way you can keep your business operating at the quality and pace you desire. But there’s still one crucial consideration: Do you have an achievable growth plan?
If you want to expand, you have to sit down and develop a plan for doing so. This means analyzing what you need, what it will cost, and how you plan to make it work. You’ll also have to set business objectives and get on a path to reaching them.
- Are you meeting your current goals? If you have unchecked boxes in your existing business plan, you probably aren’t as ready to expand as you think you are.
- Do you have a growth plan? If you haven’t sat down and created a specific, actionable plan yet, wait until you’ve done the legwork to ensure it’s a viable option.
- Is the cash available? The financial aspect of expansion is the most important part of it all. Think about how expansion will impact your cash flow in the coming years.
- When should you expand your business? If all signs are pointing to yes, you still need to ask yourself if now is a good time to expand. Think about events, sales, and seasonal changes that could delay the expansion or make it more difficult.
If you can get through all of these questions and you believe that expansion is on the horizon, it’s time to stop asking when should you expand your business and instead start thinking about the next steps. As you move forward, make sure that you have the right partners to support you, like National Merchants Association (NMA).
NMA is a merchant advocacy group dedicated to reducing or eliminating the unnecessary fees associated with accepting credit card payments. Since 2004, NMA’s payment processing solutions have been delivering tailored solutions, best-in-class customer service, and high-quality service offerings for businesses across multiple industries. Whether it’s high-risk or low-risk, brick-and-mortar or e-commerce, NMA will create the best processing experience for your company.
For more information, visit us at our www.nationalmerchants.com or by calling (866) 509-7201.