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Most of us start a business with plans to grow it. It’s the logical next step once a startup is established and secure. But how and when to grow is one of the most important calculations in business; it’s not a matter of a couple of really, really profitable months. In expansion, timing is everything. Growing too early or too quickly during an industry downturn can put a strain on your finances, production and efficiency.
In business, intuition certainly plays a role in success, and especially repeat success, but in my experience, it’s critical to rely on objective criteria to back up the feeling that it’s time to grow. As always, specifics vary by industry, but there are some constants you can rely on across the board. Some of the most basic, reliable signs you’re ready to expand include:
1. Demand is consistently high.
Demand isn’t the only sign you’re ready to grow, but you can’t grow unless you have it. If you’ve got wait lists for your product or service, you have reason to consider expansion. You need to be able to count on it long term, though, before you commit to new investment.
Demand for what you’re offering should be consistently high and plentiful, with the emphasis on “consistently.” Ideally, you have regular, repeat customers you know you can count on as you grow. Those customers will form a ready-made market for the larger, more complex, fledgling version of your company.
If those repeat customers want you to offer them more — an expanded service list, a new or improved product, a new location or a shorter wait on the technical support line — all the better for your business’s growth prospects.
2. Industry projections are good.
You are probably following industry forecasts and growth projections already, but start looking deeper into industry and outlooks. Do the research. Consider fleshing it all out business-plan style so you can see the big picture and process what the data means for your particular business outlook. You’ll be doing that anyway if you’re seeking financing for your growth, and it’s a highly beneficial exercise.
If trends show a slowdown in your market, or a newly proposed regulation or tax plan creates industry uncertainty, it’s probably not the best time to expand. Wait and see, keeping an eye on numbers and projections.
3. The business could run without you.
Could you go on vacation for a month and have no doubt your business would run like clockwork? If not, expansion could mean chaos. The functional, ultra-flexible style of operating can be necessary, and maybe ideal, through the early stages of establishing a business when the ability to adapt quickly is especially beneficial, but it’s good to have a solid foundation in your current operations before building on them.
Before growing, you ideally want to have successfully developed and implemented a full set of reliable systems for handling operations at all levels, with talented, reliable people to run them.
4. You’ve been profitable for at least three years.
Just being profitable isn’t enough. You need to have a significant history of profitability. The longer you’ve been turning a profit, the better. You need to have evidence — not just confidence — that your profitability is likely to continue. There’s no hard number, but you’ll want to have several years under your belt. You can never have too much proof of success. Many say three years is the minimum, though there doesn’t seem to be any expert consensus on the matter.
5. Your schedule is pretty open.
Don’t underestimate what it takes to grow a business well. Expansion is a big undertaking, and it requires a lot of time and focus. Planning and execution benefit from a meticulously detail-oriented approach, and you’ll likely find endless opportunities for problem-solving.
Depending on your line of work and the type of growth you have planned, you’re probably looking at some combination of recruiting and hiring, training of new and/or current staff, new office or manufacturing space, new operational systems, marketing and promotions, new regulations and new financial considerations — and you’re definitely looking at things not going exactly as planned.
As with starting up, you’ll face a getting-up-to-speed period — plan for that in calculating the costs of an expansion — when your company might need even more attention than you pay it right now. And you probably pay it a lot of attention right now.
What do the signs mean to you?
No single factor — with the possible exception of the open schedule — can dictate success or failure in business expansion. It’s more a combination of factors and their effects on your unique business situation. Perhaps that’s the intuition part — knowing precisely which signs to focus on and follow in planning your business’s growth. But generally, if you have stable cashflow, evidence of reliable and growing demand and long-term profitability, your chances of successful business growth skyrocket.
June 7, 2019 at 07:06AM
Forbes – Entrepreneurs