A dream of every budding entrepreneur is to start and successfully establish a business of his or her own. Once this is achieved, most business owners focus their sights on expansion and conquering new territories.
The process of expanding a business should be taken just as seriously as starting one. Adequate research and preparation are needed to ensure the venture flourishes and becomes profitable. Careful planning and management are also invaluable before rolling out any expansion projects.
Additionally, entrepreneurs who have decided to expand their businesses should make sure that they set realistic goals that can be achieved within a certain time frame. All their plans need to fit in with the current market and their own personal goals.
What to consider when Expanding a Business
Expanding a business often calls for a sound expansion strategy. There are numerous things to take into consideration before any final decisions are made.
Some of these are explored below:
- The Market
This can be viewed in two ways -a new location or a new use for an existing product or service. When thinking about a new location, entrepreneurs need to consider their new competitors, attracting new customers and the new strategy for running the business in a fresh location.
Alternatively, they could look at expanding within their market by diversifying their existing products.
It is important to scrutinize whether the new venture will generate enough revenue to justify its existence. There should be enough money to cater for new staff, equipment, workspace and other overheads.
- New Staff
The business owner needs to find a new team with skills and experience that are compatible with the company’s mission, vision and core values.
- Existing Customers
The entrepreneur ought to consider how the expansion will affect the existing customers. Will they still receive the same quality of service they are used to?
Entrepreneurs should ask whether their current suppliers are capable of meeting the new demands or whether they should search for others.
Plans to have in Place
As a business expands, the business owner ought to have plans in place to deal with both new and existing staff and clients as well as the current business. Many entrepreneurs become distracted by their new duties and lose sight of their already profitable ventures, leading to their inevitable collapse.
In order to avoid this, it is advisable to consider outsourcing some of the responsibilities to third parties. For instance, an umbrella company could take over some of the administrative and payroll tasks, leaving the entrepreneur free to concentrate on expanding the business.
In addition to this, plans need to be in place to cater for financing the new enterprise. There are several sources of funds including personal savings, bank loans or collaborating with private investors. The most important thing is to ensure the company’s bottom line remains unaffected.
With this in mind, the business owner should construct a financial model showing the new venture’s projected revenue, cost of expansion (including the cost of new staff, stationery, office space, equipment) and the expected operating expenses. This model could act as the budget during expansion.