I have an aunt who owns a very successful bakery. In fact, her cookies, donuts, and other sugary treats are so sought after, she now supplies to more than 20 wholesale customers (and turns down many others on a regular basis) in addition to taking care of the retail side of her business.
Because of this, many have prompted her to expand, almost pleading with her to open up more locations. Should she? Maybe. But not until she asks herself these three questions first:
Am I Mentally Ready to Expand?
Forget about the logistics of growing to new locations for a minute and consider how this type of expansion might affect you mentally. Certainly, it will bring some added stress to the situation as you construct your new site or location, and maintaining a second, third, or tenth location isn’t always easy either.
So, do you feel ready to take this on and problem-solve issues, overcome hurdles, and fight past all of the red tape and self-doubts you may feel along the way? If not, then this may not be the best time for you and you might benefit by waiting until you feel stronger and more able to face the challenges that typically come with expanding. However, if you’re mentally ready, then carry on to the next question and let’s see what your answer is to that.
Will I Benefit from Expanding?
In his piece titled “Should I Expand My Business,” Domenic Rinaldi brings up a good point that you really need to think about whether growing your business would truly be an advantage for you. Some issues to consider include how expansion would affect your core clients (would they work with you through the expansion phase or would they hit the door?), how many new clients you actually stand to gain (would your new location serve the same geographical area and, if not, is the pool of potential clients in the new area big enough?), and whether it will offer you any type of cost-related advantages (could you buy your goods and products cheaper since you would need more, or would it cost about the same since you would be shipping to separate locations?).
All of these types of issues could impact not only your new location, but your base business as well. Therefore, it would be advantageous to think about all of the potential pros and cons of expansion and look at the big picture to determine if taking this route does in fact offer enough benefits to make it worth it.
Is Expanding At This Time Financially Possible?
Of course, your ability to expand depends quite heavily on whether or not you have the finances to grow your business at this time. Some financial considerations brought to light by Sam Ashe-Edmunds in the Houston Chronicle are what your overhead and manufacturing costs would be at the new location and whether you have enough cash or funding available to not only handle the growth, but also to cover any unexpected expenses that may arise as a result of expanding.
Additionally, possible funding options should be explored if you need to raise enough capital to make the expansion possible. This might mean reaching out to lenders and seeing what line of credit they are willing to extend. Or, is there someone that could partner on the expansion with you and share some of the costs (such as when you are considering sharing a building with another business looking at expanding at the same time)? Another thought is, could you raise your prices to help pay for the growth or would you lose too many loyal customers by taking this route?
Also in regard to financial considerations, Fundera suggests that you shouldn’t consider expanding your business until you’ve seen profitability for a minimum of 36 months. This keeps you from making major decisions based on a short-term trend, seasonal revenue, or other limited spurt of increased revenue that may not continue over time.
If You Are Ready to Expand
If you have asked and answered these three questions and you feel like you are ready to grow your small business, the U.S. Small Business Administration has a ton of great information designed to help you make your expansion a success. Some of their articles include: “Forecasting for Growth,” “Using Technology to Stay Competitive,” “Ideas for Growing Your Business,” “Developing a Marketing Plan,” “Financing Growth,” and “Build Your Own Franchise,” so you might want to check them out and read up on these key areas to learn as much as you can before you take the leap. That way, you’ll know it is the right leap for you, as well as how to increase your chances of success.
Have you ever expanded your business and have some wisdom that could help others who are contemplating doing the same? If so, feel free to share your advice below so fellow small business owners can learn from you and your experiences. No doubt they would appreciate it. As would my aunt, should she decide to expand.
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