Expanding your business is an exciting time. It’s filled with new possibilities, exciting opportunities, and is a signal to the rest of the world that you are on the right track.
It can also be a huge headache. If not done at the right time, you can stretch your business too thin, producing a bunch of extra expenses without the requisite cash flow to back them up.
So how do you know when it’s the right time to expand? If you see any of the signs listed below, it might be a good time to start considering more space or a second location.
If your customers keep asking about when you’ll open up a second location or when you’ll get a bigger warehouse to keep more inventory, it might be time to start considering expansion. While one or two customers mentioning it can be an anomaly, a steady stream of customers bringing up the subject is a good sign that they’ll support your growth.
Be careful though, because this can sometimes be industry-specific. A fast food restaurant that is constantly asked about opening up a second location is one thing, but a more static, service-type of business is something else entirely. A second location may not be as ideal in the case of the latter as much as expanding resources to offer more services would be.
Simply put, growth rate is determined by whether or not the revenue in the current month exceeds the revenue from the previous month. If you have several months, or even years, of growth in a row, you have what’s called a positive growth rate. With few exceptions, this is always a good thing, but it does put extra strain on your business to keep up.
If your growth is on a steady trajectory, despite all the various bumps and hurdles that you might have to overcome in a typical business cycle, there’s a good chance you’ll be able to survive just about anything else that comes your way. Moreover, it may be that unless you expand now, you might stimy your own growth and actually hurt your business in the long run.
Like individual companies, industries can grow or shrink depending on consumer demand. A mimeograph company that flourished in 1941 would be completely obsolete by the 21st century, so it’s important to understand the trends within your own industry and be able to adapt before it’s too late. Even the vaunted Model T automobile that propelled Ford through the first two decades of company growth needed to be replaced.
Contrarily, if your industry is on the rise, particularly if you operate in a software or tech sector, you can only expect to receive more work in the coming years and decades, so it might be a good idea to expand operations now so that you’re ready when things start to increase. In addition to industry trends, if you notice that your business can provide a complimentary service to other industries, expansion will help position your company for growth through diversification.
Instead of listening to your customers on this one, listen to your employees who are on the floor day in and day out and can tell you what the daily workflow is like. If they’re telling you that you don’t have the space or the manpower to meet demand, take it seriously and make preparations to adapt immediately. If you need to build a new wing to your building or a new warehouse or distribution center, make sure you get the best local construction crew with the best local crane services, such as an Ames Iowa crane service if you’re in Iowa.
Keep in mind that expansion demands that current operations are streamlined to their most efficient. If you build a second warehouse while the first one has serious procedural issues, you run a real risk of compounding the problems further.
Whenever you choose to sign off on an expansion of your business, it should only be when your prepared for it and the market trends demand it. Expansion for the sake of expansion – or even worse, to mask real struggles – is a recipe for failure. Picking the right moment is almost as important as the expansion itself.
by: Kevin Faber