Monday, August 10, 2015

How can you insure the success of your business expansion?

When you started your small business, you probably handled most of the tasks.  You interacted with customers/clients, took care of the accounting, dealt with the marketing, made the trips to the bank and office supply store and maybe even cleaned the place.  Your business has now grown to the point where you have staff to handle many of these jobs and you are considering expanding.  What do you need to do to insure the success of this expansion?
The first thing you need to do is to make sure your business model is really fine tuned before you expand so make note of the mistakes you made with your initial opening. No matter how much you plan, there will be mistakes so use them to your advantage by learning from them.  Were you overstaffed?  Understaffed?  Did you schedule your grand opening too soon?  Did you not advertise your grand opening enough?  Talk to your staff and customers and take their thoughts and ideas into consideration. Make note of everything that went right as well and use this information to plot your expansion.
The next thing you need to do is to write an business plan for the expansion.  Most likely if your initial start up was a success, you had a business plan to drive the company launch. This expansion plan will be easier as you will have real numbers to use.
One major thing to consider when expanding is management.  When you have one location, you, the owner, can monitor everything very closely.  You will not have this luxury when you open a second location.  You can't be at two places at the same time so you will want adequate staff to maintain control.  This may require more money for payroll.  If your plan includes further expansion, this will become even more of an issue.  We have seen numerous cases where a successful business opened a second location and continued to be successful but then opened multiple additional locations and failed.  Make sure your plan shows adequate cash flow to allow for a qualified manager at each additional location. In addition to determining the cost of additional staffing, you will also need to consider the additional debt service your expansion make incur.
You will want to consider the location of your expansion.  Depending on the type of business you are running,  you don't want to new location to steal sales from your original location.  Consider whether the culture is different in your proposed new location.  What works in one community may not in another so do your research.
Supply chain is another issue to deal with when planning an expansion.  Do your existing suppliers have sufficient capacity to handle your additional purchase needs?
Another issue is whether to start from scratch or acquire an existing business when expanding.  There can be cost savings in the latter as well as built in management possibilities.
Finally, think about your energy level and whether you can adequately manage your expanded business.  The short term start-up period will be hectic, but the overall time commitment must be considered as well.
You may find economies of scale from an expansion which will abate some these additional costs, but you won't know this without crunching the numbers and completing the plan. Take your time, do your research and consider all the elements before expanding your business and you will insure your success.

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