Rita was happy with the way wedding planning business was performing. But after doing the same thing for seven years, she wanted to bring some changes into her business. This is when she decided to expand. Her new plan included catering to more areas of the cityas well as high-budget weddings. She also wanted to getmore creative decorations to attract more customers. This meant hiring more people as well as other down payments. While her profits were more than enough to cover this, a good friend suggested that she opt for a business loan.
This decision paid off because three months down the line, a high demand meant higher-than-expected costs. The business loan gave her the monetary buffer to pay these costs.
Today, her profits have more than doubled. Plus, she managed to stay abreast of competitors.
Therefore a business should expand at the right time. Many factors help determine when you should bring in changes. There are also some guidelines you must remember to make your expansion process smooth. Read on to know all about them.
· Demand: First, you need to assess the existing demand. A business should only expand if there are enough takers. If you have a hotel in a busy tourist area, you may consider increasing the number of rooms. If the tourism in the area decreases for some reason, expanding your business may not be a wise decision. It will only put unnecessary stress on your finances. After all, variable costs like maintenance of assets and employee salaries rise.
· Competitors: Keep your friends close, but enemies closer, goes the common adage. Similarly keep a close eye on your competitors. If a rival firm is expanding, you may also need to expand to keep your business afloat. But it is always better to wait and watch how your competitor is doing in his/her new path. This may be a good marker for you. If you see your competitor is benefiting from the growth, you can follow suit. But if it turns out to be an unprofitable move, you should steer clear of stepping foot in the same direction.
· Finances:The company’s financial health is one of the most important factors. How will you finance the expansion? Do you have enough resources to carry out the expansion yourself? Or, will you need a business loan? Assess these points well. If you are happy with the affordability, go ahead. Or else, you should wait until your finances stabilize. But don’t let this stop you. Remember, businesses are rarely self-funding. It may be a good idea to get external help if the expansion plan is otherwise sound.
· Expansion period: When you grow your company, business operations may stop or slow down for some time. For instance, if you are expanding your restaurant, you will have to keep it closed. Similarly, if you are moving to a larger office or hiring more employees. You will need time to shift or train the newbies. So, time the expansion to match the lean season.
· Changing roles: With a larger business, you will need a larger number of employees. So, you may have to adjust to working with other people. You will need to include their opinions in the core matters of the business. This means you must be ready to cope with this change in your role.
A larger business can grow your profits and bring your costs down as well. So, if you feel the time is right and you have the right tools to expand your business, go ahead and do so. But remember the guidelines mentioned above; your job will become a lot easier.