Thinking about expanding your business is a big deal for obvious reasons. If your clientele is growing and you need to move to a bigger space or increase the number of employees, you need to make sure that you’ll continue to operate efficiently and effectively. More importantly, you need to make sure that you don’t get ahead of yourself.
Growing is good, expanding without doing your research is bad. Is your business ready?
Look at the World Around You
In 2015, I had a client that wanted to expand. Business was booming and they were running out of space in their tiny warehouse. By 2016 they had purchased a building and started pouring money into the building and increasing inventory. Then 2017 happened, and the business closed two years later. From boom to bust in three years’ time. That is what can happen if you don’t look at the world around you.
Pay attention to the Nigerian and world economic factors. What affects other parts of the country or other industries can affect you as well. Kiplinger puts out economic outlooks and forecasts every year. If strictly looking at the numbers makes your head spin, Forbes usually has a lot of great commentary about indicators and forecasts.
Either way, keep researching until you find one that you can make sense of. These economic forecasts are done by experts, and while they can only make an educated guess on what all of this means, it can at least help you make some good decisions.
Focus on Spending Less and Saving More
Expanding means spending more money. What typically happens is that through the expansion, you’re spending more than you’re making. On paper, you’ll be at a loss, therefore, you need to be financially prepared for it. Do not rush into the expansion. Make sure that you begin saving funds to prevent the business from being cash strapped.
Even if you’re able to obtain a loan, you’ll begin making payments before the business begins making a profit again. If you’re expanding to a second location, the second location will pull a lot of resources from the first before it can stand on its own. If you are expanding existing space, the move may not be as difficult, but the upfront funds needed can still become a drain. In any event, if you begin saving along with planning, you will experience less financial stress throughout the expansion.
Set the Proper Foundation for Expansion
Yes, expansion may mean more money, but it may also mean more problems. Before you expand, make sure that you have properly secured the foundation for the business. Expanding may mean adding additional employees, if you don’t have an effective human resources policy, it can cause you additional problems. In addition, making sure that your books are straight and you have a good handle on your tax liabilities could cause additional stress on owners.
If there are problems that are occurring with the business now, expanding will not make them go away. Make sure that you deal with the issues prior to expansion so you won’t bring the problems with you. Do your best to deal with potential problems before the expansion.
Begin training employees to deal with the expansion. If you have people that have been with you for some time, determine if they’re ready to take on more responsibility. Evaluate your staff and make sure that everyone is functioning well in the right positions. This could be a great opportunity to make staff changes.
Bring your professionals in on the expansion discussion early. Consider hosting a meeting between your attorney and accountant. If you have others that you rely upon when making major business decisions, include them as well. As your company grows, your knowledge and understanding of your company must expand as well.