Considering expanding your business? At this stage, you’ve already overcome countless challenges and persevered. However, the challenges businesses face during expansion are different than those you might have faced while starting your business. Below, we’ll highlight some of the critical questions to ask yourself as you move forward to make it (a little) easier to craft a winning growth strategy.
1) Am I Meeting My Current Goals?
If you’re lucky or have been particularly strategic, you’re considering expanding your business because you’ve already got more business lined up. However, this is only one part of the picture. Consider:
- Customer Service
- Quality of Products/ Services
- Value/ Mission-Based Goals (green initiatives, company culture, etc.)
2) What is the Best Expansion Method for My Business?
If you’re already receiving more orders than you can reasonably fulfill or have lines out the door, the answer may be obvious: to upgrade to a larger location, add a second location, and/or to add to your team. However, if you don’t have increased business yet, you’ll want to consider things like tapping into new markets and adding new products or services.
3) What’s the ROI of My Business Expansion Model?
It takes a fair amount of work to calculate the ROI, but doing so ensures that the model you’ve chosen is going to give you the returns you need to make it worthwhile. If you’re not seeing the profits you expect, it doesn’t necessarily mean the idea is not viable, but you’ll want to work through ways to save. For example, could you outsource some of the administrative work, like accounting, invoicing and payroll? Can you work with alternate vendors who offer better rates? Can you lease equipment instead of purchasing it?
4) Can I Afford to Scale?
In a perfect world, your current revenue will be adequate to cover all your expansion needs, but most businesses don’t have this luxury. Moreover, many businesses, including those which are profitable, don’t qualify for bank financing or can’t get the level of funding they need. With that in mind, you’ll want to explore all potential business financing options before moving forward.
5) Do I Have Adequate Cash Flow?
Profitability is important, but it doesn’t necessarily mean that you have the cash you need to cover daily expenses when you need it. Research presented by Entrepreneur magazine indicates that 82 percent of businesses fail due to cash management issues. Lack of working capital, typically caused by sluggish cash flow, can make it impossible to cover payroll, purchase inventory or supplies and other expenses. If your customers aren’t paying their invoices promptly, it can stall expansion or halt operations altogether. Do an analysis of your cash flow ahead of time. If it’s tight or bottlenecked, look into options like invoice factoring to reduce the time between completing work or fulfilling orders and getting paid for it.
6) Is My Team Ready for This?
Ideally, you’ll have staff in place prior to ramping up the business. That way, they’re trained and ready to tackle the increased workload before it hits, and the transition will go smoother. Particularly for businesses entering the growth stage, it’s important to cross-train employees as much as possible. A versatile workforce can step in to cover the duties of others in a pinch and may cut down on the total number of employees you need overall. However, it’s equally important to avoid overwhelming your team. Again, outsourcing can help with this, so morale stays high, the team remains excited about the shift, and errors are minimized.
7) Am I Ready for This?
Chances are, you’ll be devoting more time to the business during the shift. While you can, and should, take steps like delegating work and setting aside time for yourself, there will still likely be more hours logged on your part. Take time to discuss the additional involvement with your family. This will minimize your stress and make it easier to focus on the work ahead.
8) What’s the Competition Doing?
On a final note, check out what your competitors are doing and see if anyone has tried to grow leveraging the same strategies you’re considering. There are lessons to learn in both their successes and failures.
Learn More About Invoice Factoring
Invoice factoring is a valuable tool when solving cash flow issues. However, even if you’re not ready to tap into it yet, you can get yourself set up with a factoring company now to ensure you’re prepared for the future. Plus, when you partner with a company like Interstate Capital for your factoring needs, you’ll gain access to a wealth of other solutions, like equipment leasing and discount programs. Download our free factoring guide to learn more.