Is Your Business Ready to Expand? Consider These 5 Things First
According to a survey by the National Federation of Independent Business, the overwhelming majority of small businesses believe they can double their sales and increase their workforce within five years, and 83 percent think expanding would be a positive experience with relatively few issues to deal with. However, here’s the truth: Few companies follow through on their expansion plans. They can’t get past the obstacles and unforeseen growth issues. Prepare now by considering the following before diving into a business expansion:
Clarify your value proposition
Expanding your company to new territories requires thorough research and analysis to figure out your value proposition. Study your competition to determine if your new market is over-saturated and if the community really needs or wants your service.
Next, meet with members and leaders of your new community to determine if you can solve a problem that’s urgent and under-served. If there’s competition in your market, ask potential customers what they’re satisfied with and what they are missing from those other companies.
Define your capabilities
There are more ways to expand your business than opening new locations. Just because you’re outgrowing your current business model doesn’t necessarily mean you should start over again in a nearby community. Start by defining your capabilities and how a new service and revenue stream could fit into your current business. For example, graphic designers could partner with SEO specialists and copywriters to offer more complex service packages. A print shop could start offering more expensive, express service with delivery options. Giving your customers options that naturally fit into your business model could provide a more organic way to expand without the extreme growing pains.
Figure out your financials
It may seem straightforward to figure out your financials for your current business model, but expansion comes with long-term costs. Those financial issues can be difficult to define and are contingent on some unseen variables, like your new market, required services and how many employees you need to hire. Meet with a financial adviser, or consult with financial experts with a track record of industry expertise and insight into global financial markets. They can also help determine who you need to talk with, from insurance specialists to the credit analytics department and enterprise risk solution specialists.
Examine the costs of hiring new staff
Hiring new staff comes with the territory of expanding your business. Taking on staff comes with costs you probably never considered. MIT’s Sloan School of Management discovered an employee can cost a company up to 1.4 times their annual salary, when you consider employment taxes, payroll and benefits. Those numbers could mean you can’t afford to hire as many people as you want to meet the demands of your growing business. You also need to determine if you have the available cash flow to keep your payroll going without interruption. Cash flow crunch can also affect current and new employees who feel the company is unsustainable and decide to start looking elsewhere.
Keeping up with demand
Rapid, successful expansion is just about every business owner’s dream. Until you realize you’re not set up to meet the customer service demands of your new company. Aside from dealing with complaints, resolving issues and ensuring you have the inventory and resources to fulfill orders and service requests, companies need to keep innovating. Failing to keep up with new technology and trends in your industry can send restless customers looking elsewhere.
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