Is your business ready for expansion?
If there is an increasing demand for a service or product that your business can provide you might be wondering if it's the right time to try to grow your business.
There will be a lot to think about and it's not always as straight forward as it might seem.
Areas to assess include your potential marketplace, how many competitors you have now or will have if you expand your business, how will expansion affect your existing customers, and will you need to employ more staff and increase the time spent on business administration.
Extra costs incurred during expansion will potentially affect your business cash flow and you'll need to be able to trade through this period.
Funding is a challenging area for small businesses, and whilst a good bank relationship manager can often help there are also other options to a 'traditional' bank loan.
Invoice factoring, short term overdraft facilities or leasing equipment could provide funds you'll need to finance expansion.
Expanding in small steps will prevent you overstretching beyond the market you can realistically attract.
You should have achievable goals and deadlines to reach. This will keep the focus on the next step without the whole process becoming overwhelming.
Try to set up systems at the beginning that can expand with your business without requiring wholesale change every few years.
Involve staff wherever possible - especially if they have skills in areas where you might not.
To retain your existing customers make sure that service levels don't drop off. As your business expands you should aim to make sure existing customers benefit too.
Keeping Cashflow Under Control
Cash is the lifeblood of any business, and this simple fact can be easily overlooked by putting too much emphasis on 'paper' profitability.
Poor cash flow management can even force a profitable company out of business.
The cash flow problem is greater for an expanding business. For example, if billing customers is delayed but at the same time additional stock is being purchased to fulfil increased orders, it's easy to find your business quickly becomes short of the cash it needs to pay it's suppliers and employees.
In a growing business cash flow projections are a useful tool to help foresee and prepare for any potential cash shortages.
Proper cash flow management procedures also help to ensure that any outstanding customer invoices are chased quickly and effectively.