If you want to grow your small business, it is essential to have a business expansion strategy. After all, with every business decision comes an element of risk – and you need to ensure that you have a plan for the pressures growth can bring. Expanding your business is a whole new challenge compared to everyday management, so it is important that you are prepared. With proper planning, you can make sure that your business growth plan is both timely and sustainable.
The risks of expanding a business are best illustrated with an example: let’s say there’s a successful local coffee shop. The baristas really know their stuff and the beverages they serve are delicious, so the shop is always busy. One day, someone approaches the owners and suggests that bagging and branding coffee beans would be a great way to expand the business. They’re reluctant, but go along with the idea. However, they very quickly find out they’ve entered a crowded market; they’re spending tons of money on packaging and marketing, whilst the debt is racking up. Meanwhile, their core business suffers as they’re too distracted.
What this scenario shows is that the owners of our hypothetical coffee shop launched a new arm to their venture without a proper business expansion strategy. If they’d taken a step back, assessed the market and evaluated their capacity, they would have known the time wasn’t right. From here, they could have drawn up a plan for the future to ensure their business growth was properly managed. So – if you’re a small business owner who’s looking to scale your business, here’s seven things to consider when devising your business expansion strategy.
1. Stress test your idea
For many entrepreneurs, when you get an idea about how to expand your business, you can get caught up in the excitement. As a result, you can develop an idealized image of the outcome, which distracts from the reality of the situation. Instead of rushing in, business owners need to make sure their idea is built on facts, not speculation. This means examining the thought process carefully and stress testing the ideas. Below are is a list of questions to start with:
•How crowded is the market?
•Is there sufficient demand for the product or service? Are my revenue projections realistic?
•What effect will expansion have on cash flow? Are you liquid enough to keep things running in the short term?
•Do you have a plan for financing your small business should you run out of resources?
Moreover, it’s critical that you do your research before embarking on your business growth plan. Make sure you’re diligent, thorough, and clear-headed. Always study contracts carefully and make sure that you completely understand the information. Remember – the best way to grow a business isn’t necessarily fast.
2. Do what you do best
If you’re thinking about diversifying your business, whether it’s through adding a new product or introducing a new service, you need to be sure you know what you’re getting yourself in to. Often, it’s a lack of experience that will cause a business expansion initiative to fail. Generally speaking, it will be capitalizing on your existing expertise that will deliver the best results. Therefore, before rolling out your new offer, you need to ask yourself the following questions:
•Do you have the relevant experience to handle this new aspect of the business?
•What will it take for this new venture to operate to the same standard as your core business?
•What’s your unique selling point? What will set you apart from the competition?
3. Integrate branding into your business expansion strategy
Your brand is how customers relate to your business. Often, it’ll be a big part of what makes them return customers. Therefore, when developing your business expansion strategy, you need to consider how this shift will affect your brand. For instance, if you’re expanding into a new market, will your existing client base recognize the company? Could expanding into this new area hurt your reputation? If we reflect once more on our coffee shop example, it’s possible that loyal, local customers were put off by their neighborhood coffee bar becoming a manufacturer.
4. Never compromise on quality
A high-quality product and excellent customer service are crucial to business success. Before you expand your business, you need to consider the effect these added pressures will have on quality and service. For example, can you continue to provide the same level of care and attention to customers with these extra responsibilities? Will you have to cut corners in order to manage cash flow? Maintaining a high level of customer service and an impeccable product should be a top priority if you’re expanding your small business – so don’t let standards slip.
5. How will expansion affect your team?
Often if you’re growing your small business, it’ll implicate more than one person. Therefore, you need to consider the emotional effects of expansion – for instance, your staff might be used to handling your regular customers, but what will the new clientele be like? Can the staff cope with more put-through? As a result, you might have to hire more staff, or even introduce a new layer of management. This will mean adjusting to delegating tasks and trusting others. Subsequently, you’ll need to emotionally adapt to the new relationships that business expansion creates.
6. Look to the long term
Although fast growth is exciting in the short term, you need to be mindful of the implications of rapid expansion. For example, let’s say you decide to take out a small business loan to sustain growth; what will the long term financial ramifications of this be? Can you afford the repayments? What risks are you exposing yourself to long-term? Are your growth forecasts realistic? Furthermore, you also need to examine the impact of risks beyond your control. This means that you’ll have to consider how economic conditions might affect your business expansion strategy.
7. Define what success means to you
Ultimately, you need to figure out what success means to you. For example, what are your goals in life? Do you want to spend more time with your kids or partner? Do you want to provide a better life for your family? What does this mean? From here, you need to consider whether or not expanding your business will help or hinder these aspirations. If it’s the latter, then perhaps now is not the time to grow your business; allow some time to pass and it’s likely that soon, there will be a more favorable moment. Remember – your business expansion strategy should be focused around your unique goals, so think about how growth will help you meet these targets.