Expanding Your Business
How will you finance the expansion?
Expansion costs could include increased inventory, a larger facility, and more equipment.
After assessing your current financial situation, you may determine cash on hand can cover some or all of these costs, or that you can tighten your receivable cycle and improve collections. Perhaps your vendors will offer flexibility in extending payment terms and credit availability to ease cash flow problems caused by up-front costs of growth.
If additional financing is required, think about your comfort level with taking on debt or giving up part of your equity. Balance emotional aspects with the realization that prudent borrowing can benefit your business by providing liquidity to grow your sales and income. Likewise, investors who supply cash in return for a stake in your business may also be a source of sound advice and managerial guidance.
Will you need additional staff?
Payroll can be expensive and paperwork intensive. But sales, marketing, business development, operations, and administrative tasks will expand along with your company. Make a realistic judgment of how much of the increased workload you'll be able to handle yourself.
Remember that the right personnel can boost sales and add to the bottom line. Alternatively, hiring temporary or part-time employees and independent contractors can keep you from becoming overwhelmed while holding costs in check. Cultivating business contacts and joining industry associations are inexpensive ways to tap expertise. Outsourcing functions such as Web site maintenance or marketing gives you access to professional skills.
Will the benefits outweigh the costs?
Financial projections can help you determine whether sales and profits will make the expansion worthwhile from a revenue standpoint. But also take into account why you started your business and what customers expect from you. Proving personalized service may prove difficult as your business grows, making customers unhappy. Yet choosing to remain static exposes you to the risk of fending off competition from larger companies or losing customers as their needs outgrow your capabilities.
Expansion decisions present both challenges and opportunities. As you're contemplating what's right for your business, give us a call. We can help you plan for success.