You’ve gotten off the ground and your business is doing well. How do you know when it’s time for your small business to expand and branch out? While there’s no set formula to know when it’s time to expand your current business operations, there are some factors that may indicate that it’s time to grow.
You Need More Space
One of the obvious signs that it’s time for your current small business to expand and grow is if you’ve outgrown your current space. Certain brick and mortar shops have size needs which must be taken into account, like restaurants, retails shops, or salons. If your brick and mortar business location is bursting at the seams, then it’s a sign that you should look for a space that can accommodate your burgeoning business operations.
When you need more space, then you have a few options. You could opt to open a separate, secondary brick and mortar location. Or, you could lease inventory or warehouse space to manage your growing inventory. In either scenario, investing in additional space can help take your business to the next level, allowing you to handle more customers.
You Have More Business Than You Can Handle
Another concrete sign that it may be time to expand your current business if it you have more customers than your business can manage. If you’re in food service, are you turning down tons of reservations? If you’re in sales, are your employees working around the clock? Are you consistently running out of inventory? If the answer to these questions is “yes,” then it may be time to expand.
Having more business than you can handle is good problem to have. Don’t turn a blind eye to being busier than you may have imagined, because it could cause problems in quality and performance. Turn that added potential business into added revenue by making plans to grow up and out.
Your Industry is Growing Rapidly
A third sign that it’s time for your business to expand is if your industry is evolving at breakneck speed. Some business sectors are subject to rapid changes, like computers, healthcare, and technology. In those industries, changing and growing is a necessity to keep pace with the current ever-evolving market. Growing and expanding into new products or services may be required to stay competitive with others in the field.
Your Business is Consistently Making Money
A fourth sign that your business is ready to expand is if your business has been in the black for several years. One caveat: don’t jump into a huge expansion if you’ve had a recent, temporary surge in profit – one bustling quarter isn’t enough to sustain the funds to expand your business. However, consistently making money over several years is a strong sign that it may time re-invest in business expansions.
Talk to your financial advisors about how your business is doing. If you have a ton of extra cash or your margins are way larger than the industry standard, that may mean you have room to pick up some more volume.
Your Business Operations Run Efficiently
A fifth sign that your business can handle expansion is if your operational systems are relatively efficient. Part of business expansions requires you to take what you’ve created with your startup and apply it to a secondary location or higher production.
If you have successfully managed to put together an employee manual, run accounting systems, and manage business inventory, then it makes logical sense that your business could handle the pressures of expansion with relative ease. As you and your employees get better at what you do, you’ll find that you can handle more business with the same amount of time and effort.
Your Business Has the Funds to Grow
Lastly, one of the signs that it’s time for your business to grow is when you have the available funds to back an expansion. Access to available capital is key to a successful business growth. Note: this doesn’t mean that you necessarily have the liquid money to reinvest in your business, but that you are in a position to obtain the funds you need to do so.
Many small businesses take out loans to fund business expansion. Purchasing additional inventory, purchasing a second business, or taking out a lease on a bigger commercial property can all be financed by a small business loan.
Assess whether borrowing additional money could be used to grow your current business operations. The cost-benefit aspect should weigh in favor of being able to repay that amount back in a reasonable amount of time. For more information on using loans to expand business operations, visit Funding Options to Start and Grow Your Business.
Room to Grow
Knowing when it’s time to expand your business isn’t an exact formula. You should look at your current business operations, current business needs, and day-to-day operations in order to make that assessment. If you decide that the factors are in place to support a business expansion, then it’s time to look at more space, more inventory, more employees, and more business!