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What You Should Consider Before Expanding Your Business

What You Should Consider Before Expanding Your Business

Every business owner reaches a point where they’re ready to expand their company. However, you might find that it’s tougher to scale than you expected. Scaling a business isn’t just about opening a new location. It’s about leveraging your experience to take your business to the next level. Here are a few questions you should consider before expanding.

Where Are You Going to Find the Most Customers?

Not every location is going to be equivalent in terms of market penetration. By researching market conditions, you’ll find the best places to go. Check out what an area is like online and in-person before making any decisions. That’s how you’ll know whether it’s a good idea to expand there.

For the best results, you want your customers to come to you. And, you don’t want to steal clients from your existing location. Otherwise, that would simply defeat the point of somewhere new. We’d recommend spending the most time on this aspect of your business. As we all know, location matters more than most things.

How Are You Going to Stock New Inventory?

Another thing you’ve got to consider would be inventory procurement. Sometimes, you’re not able to use the same procurement methods at a new location. If it’s not possible, you should be aware of that before opening the store.

Opening a store without a procurement plan is a surefire way to acquire growing pains. To start, we’d recommend speaking to your existing suppliers. Hopefully, they’ll be able to work with you in your new place. If not, then you’ve got to figure something out before pulling the trigger.

What’s the Rent Going to Cost at a New Location?

Before you expand, you should understand how much it’s going to cost to rent a new location. Depending on the market, commercial rent can vary by quite a bit. To scale a business effectively, you’ve got to know these metrics. Otherwise, you could wind up losing money at the new spot. Ask around to see whether someone has a great deal. Nowadays, you can often find a better deal just down the street. The owner might be aching to get some new tenants. If that’s the case, you’d be surprised by how much they might be willing to lower the rent.

How Are You Going to Use Leverage to Scale?

What’s a better idea: should you wait until you’ve got all the cash to pay for everything upfront, or should you utilize the leverage you’ve got in the company? It might sound like a simple decision. However, waiting till you’ve got the money would slow you down a lot. Modern businesses tend to use leverage, especially when they’re expanding.

The best thing about this is how the leverage generates a return. Putting things on credit isn’t always a good idea, but when you’re using credit to expand your revenue, you’re making a smart choice. The credit will actually pay for itself and then you’ll be able to expand so much faster.

Can You Cut Costs Effectively?

As a business owner, you should understand a lot of things that go into a successful business. Still, at the end of the day, there’s only one thing that matters. Are you running in the red or black? Losing money isn’t always a bad thing. Plenty of businesses don’t turn a profit for their first couple of years, but you’ve got to be working toward becoming profitable. Otherwise, you’re just working on borrowed time.

Don’t just look at how much you’re bringing in. Look at how much you’re spending, too. Simply cutting costs could turn an unprofitable business around. Every quarter, go over all your expenses. Then, see if there’s anywhere you can cut back. Perhaps, you could work out a better deal with your suppliers. Or, you might be able to get a reduction in your rent. Any time you’re reducing expenses, you’re making things easier on yourself

Scaling a Business Effectively

Scaling a company is all about creating a system. Once you’ve expanded a few times, you’ll start to understand how things work. For the first few times, you’ll feel a little nervous, but over time, you’ll become a master of your craft.

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by Lizzie Howard // Lizzie Howard is a Colorado native who after graduating from the University of Colorado spends her time as a freelance writer. When Lizzie isn’t writing, she enjoys going on hikes, baking for her friends and family, and spending time with her beloved yellow lab, Sparky.

Opinions expressed by contributors are their own.