If your small business has been thriving for an extended period of time, you may be considering expansion. While expanding at the right time can cause your business to boom, there are many components to business expansion that must be considered before making this big decision. Whether expansion to you means opening a new location, acquiring a new business, or even expanding the size of your current location, expansion can be beneficial to any type of business. Look below for important questions to answer regarding your business before you know if you are ready to expand.
Do I have enough financing to expand?
In an expansion project, you always have to prepare for things to go sour. Construction costs can rise, structural problems can come up, etc. In planning for the project, it is important to factor unexpected problems like this into the budget for the expansion. If you were to run out of capital mid-project, you just invested valuable time and money into something that will not come to fruition. To be safe, unless you are 100% certain that your business can handle unexpected budget hits during the project, you should wait to expand.
How can I access additional financing if needed?
Before starting your business expansion project, you need to consider all possible outcomes, as stated above. Included in that is figuring out what to do if you run out of financing mid project. Are you prepared to take out additional loans? Do you have a trusted lender on hand? These are all important things to consider prior to beginning an expansion.
How can I handle the rise in costs?
Although expansion can be an exciting time for a profitable business, it is also an expensive time. With a new location comes new inventory, new rent, new utilities, more payroll, etc. Even if you have enough financing to pay for the completion of the project, do you have enough to keep the new location running? Obviously a new location also means additional revenue coming in, but will it be enough to offset the added costs?
Can I afford additional staffing?
As stated above, a new location brings about several additional costs, the biggest of which is staffing. In addition to wages, you have to consider the time and resources to train these new employees, as well as ensuring you have a competent manager to run the new space. Additionally, depending on the type of business you have, you may have to consider additional employee benefits if they are full-time at your company. Are you ready to handle this large additional expense?
All in all, expansion is an exciting time for any business, but if it is not planned carefully, everything can go horribly wrong. By considering the questions above, it is easier to know what to expect when it comes time to expand. By having a well-constructed plan, you can make expansion easy!