If your small business has been operating profitably with steady performance for some time, like most SME owners you might be looking at expansion.
Expanding your business and scaling it for further growth is the dream of most entrepreneurs but it can also be a very stressful and tedious process.
Proper planning, forecasting and great execution is the foundation of any expansion plans. Getting it wrong however might lead to very negative repercussions. At best, you’re back to square one if it does not work out. The worst case scenario could cost you plenty of time, effort and money.
Planning your expansion and growth means carrying out onerous amount of due diligence. This may include other areas of research that may include studying market trends and also seriously questioning yourself if you are ready and up to the task.
Readying your financial plan
Your current financial health is the number one factor you need to consider when thinking of expansion. Regardless if you’re targeting organic growth or through acquisitions, you’ll definitely need cash.
Thus, you need to ensure that you have got enough cash flow to sustain your expansion plans. Don’t be overoptimistic in this area. Try to be conservative when doing up your cash flow forecasts and always provision for the worst case scenario. You will need funding and a reasonable amount of it to propel your growth.
If these funds are not readily available, there are always alternative sources of funding that you can pursue. Applying for a business loan from banks is the most common way. Other funding sources in the form of an investor or a venture capitalist can be explored as well if you don’t mind parting with equity.
Is this the right timing?
Timing is critical when ramping up growth. There are countless failed ventures that had innovative ideas that were adopted by the mainstream market in later years. However, these startups failed because their ideas and product were too far ahead of their time when launched.
You do not want to be too far behind your competitors as well to lose the first mover advantage.
You may be profitable for now but is it sustainable? Do you have enough data to show that your expansion plans are validated or are you basing your reason on your gut feeling that a wider audience will pick an interest in what you’re offering?
And have you worked out if it will stand the test of time? Of course, these answers are not expected to be resoundingly affirmative, but still, you should have sufficient ideas and concepts to demonstrate that you know what you are doing and that the available data is supporting your idea.
Apart from these quantitative questions that hard data and analytics can help with, there is also the qualitative aspect of timing.
Which is, is this really want you envision for your business? If you are very comfortable with your current business model and the risk versus return equation, perhaps the time may not be right for an expansion.
If you move too fast, you may not be able to cope with the way your company is changing. Rapid growth within a short period of time will usually change a company’s existing culture, process and models to some extent.
Will there be demand?
Expansion means that you will be looking to rev up your revenue but have you already identified where your growth market will be? Who will you be selling to and what is your ideal buyer persona?
You should have a clear idea of whom or what your market is. You should have a clear understanding of the target market you are aiming to break into prior to attempting to scale up to reach them.
It is always easier to sell a product or service with an existing market then to create a market for a new product or service.
Some deep assessment is required of the present state of your business. Have you properly addressed the needs of your current customers? Do you already practice customer segmentation to improve your margins?
Are there any other ways you can market and cross sell other complementary products or services to existing customers? What is your wallet share of your existing customers compared to competitors?
Other aspects of timing you should consider are the general and macro-economic environment. Is the country you are operating in currently in expansionary phase or recessionary cycle?
Are consumers in your target market spending more with rising discretionary income or are they tightening their belts in view of poor hiring sentiments?
Do you have a strong team?
No matter how visionary you are as an entrepreneur, without a strong and able team executing your plans there’s no way your expansion plans will work out.
When you take that bold step to scale up, you are going to want only the most dedicated and trusted people on ground. You need to hire for the right fit with your organization’s culture and direction. Attracting talent including managing millennials will be an important skillset.
You definitely need more hands on deck to cope with the expected increase in workload and volume. Pace your talent acquisition and make sure you have a system in place (SOPs) to make sure new hires can onboard and get up to speed fast.
And remember those who have been part of your business from the beginning. If your existing team seem like they can take on more responsibility and are committed enough, by all means allocate more duties to them. The moment you go big, you are going to have to deal with less of the pixels and more on the big picture. Utilize the capable hands at your disposal to run the gears while you dedicate time on strategy and planning.
If need be, outsource and delegate non-essential processes such as bookkeeping or payroll accounting to vendors to keep your team lean.
Fail to plan, plan to fail
The moment you scale up, things are going to get much more complicated in your business.
Instead of managing by your gut feel and industry experience, you need to implement systems and processes in your business.
Before scaling up, carry out an assessment on your current processes. Are you able to identify certain repeatable processes that can be automated via technology?
Is your existing staff trained in other areas aside from their main role? Will there be someone else who can step up as replacement in the event of any one staff is not around or able to perform their key role?
Without proper implementation of systems and processes, you will be burnt out quickly when you execute your expansion plans. There will be many contingency situations where you are required to put out the fires and eventually, it will just be one mess of a situation while you keep the plates spinning.
Do You Have The Right Vendor/Supplier Support?
Ultimately, when you scale up your business, you are going to be needing more of everything. Especially If your business is the type that is heavily reliant on raw materials or support from vendors and suppliers.
Therefore, ascertain if your vendors can meet up with your increased demand – assuming all goes well and you have an increased volume of demand for your product after scaling up.
If you foresee there might be cash flow gaps with an increase in purchases volume, you can also utilize banking facilities such as trade financing as an instrument to pay your suppliers.
It is important that you are able to cater to the needs of your clients – Moreover, that is the whole reason for the scale up in the first place – to reach a wider audience and expand your reach.
If you anticipate that your current vendors or suppliers will not be able to meet up with your increased sales, then you should start shopping for replacements or support from other suppliers or vendors.