Despite today’s volatile market, a lot of business owners are still beating the odds and weathering the turbulent economic environment. For those who have managed to succeed, the likely next step is expansion.
Not so fast.
Though you have survived the first trying years of business building, this is not a guarantee of success in the future or that all endeavors will go smoothly. To ensure that you remain successful and continue to realize your business goals, you must do your due diligence before you dive into the grueling and arduous task of expansion.
Time and time again, history has shown us that even the largest names in business are not exempt from experiencing operational pitfalls. It may be difficult to imagine that companies with decades of experience and success still struggle with conquering and sustaining new market growth. Google, eBay, and Target are just some examples of large corporations failing to achieve their international expansion targets. This proves that customer preferences vary from place to place; so do competitive dynamics.
The decision to expand should be based on more than just gut feelings. There are several factors to consider when deciding if you’re ready to scale your business. Be sure that you’ve satisfied these prerequisites before considering expansion.
Overwhelming Customer Demand
Customers can tell you a lot about how your business is doing. They can provide cues about what your next move should be. Are your customers consistently asking for more of your products? Are you finding it difficult to meet all of the requests for your service? If your products and services are in high demand, you must be prepared to meet these requests or you may risk losing your customer base.
In order to meet these needs, a business may expand their operations by adding locations, locally or globally. They can also improve or upgrade their product/service features based on customer suggestions. When customers tell you what they need, that is an indication, sometimes even an assurance, of revenue to come.
Have a Dream Team
Having a great team is just as important as having a sound business plan. It’s crucial to hire quality, experienced workers who will be invested in the company’s success. Even the most brilliant ideas fail without the proper manpower to execute it.
With results-oriented people who are dedicated to reaching their goals and are committed to using ethical standards in their practices, your company is in good hands. The same individuals who helped you build your company will likely be the same people interested in carrying out the expansion plans.
You Have a Solid Cash Flow
When expanding, you don’t see revenues immediately. It takes time and growth requires money. What’s important is that you have enough cash to sustain you during the lean months as you wait for expansion revenues to come in. Some businesses fail because they were not able to gauge their financial capability versus their ability to expand. This could cause a significant cash flow deficit that results in the business closing. Before expanding, have enough cash to sustain you for 6 to 12 months.
If you’ve achieved your current goals–especially profit goals–then it may be time to up the ante.
A Different Perspective
In many cases, when businesses consider the cost of expansion, they hesitate. While it is true that you need funds to grow, the success of your endeavor will depend on the kind of expansion that your company needs. Most owners associate expansion with physical expansion, but there are other methods to expand. Here are a few ways to grow your business outside of physical expansion.
Opening up to franchising. Franchising is another way to grow your business without the responsibility of building another location yourself. Though you leave it to another team to build the additional business, you retain some control based on your franchising policies. The International Franchise Association provides extensive details of this business model. They have resources that will teach you how to set up policies and contracts. They can also assist in evaluating new networks where you can offer your business as a franchise.
Create products you can upsell or cross sell. New products can create new revenue streams. Creating product upgrades or services that compliment current products is another way to expand. This gives your business product diversification, allowing you to cover multiple markets.
Discover new markets. Remember the Blue Ocean strategy? While it may not be as popular today, it’s still an effective strategy. Similarly, a lot of individuals make money in niche marketing. Your business can succeed this way as well.
Take your business digital. If you have not sold your products or servicing online, this is another option for expansion. Analysts reported that this year, a whopping 63% of the US population is likely to buy goods online.
Compared to expanding physically, e-Commerce might prove to be equally, if not, more profitable. Consumers spend substantial amounts of time on the Internet; you can cash in on this behavior. Forrester Research projects the eCommerce market potential to grow to $370B in 2017. With the right planning, you can take advantage of this growth while avoiding the cost of physical expansion.
An expansion is risky, but once the proper due diligence is done, it can be a positive step for your company. If you meet the criteria in the article and decide expansion is for you, consider all of the options for expanding to find the best fit for your business and customer needs.