Getting Ready for Business Expansion
It’s every businessman’s dream to see his venture grow. If you feel it is the time for you to consider expanding your business, careful planning must be done. Unfortunately, this is rarely the case because most entrepreneurs rely more on their gut feel than conducting a thorough study of the situation.
Having gone through the same situation several times in the past, I have learned many expensive lessons. Hopefully you will not commit the same mistakes. Here are some of the things that may prove useful to those planning to grow their business:
• Make sure that your business has already achieved a steady growth. Analyze your net income every month for at least one year. Be able to spot trends or seasonality – for example, your sales may be strong only during the Christmas season. If you have proved that your sales is indeed increasing, then there’s a valid reason for you to consider expanding.
• Know if you are ready for the managerial demands of a bigger business. I know of several small entrepreneurs who are better off with a small business, than a bigger one in which they have many employees. They do not know how to delegate, thus ending up doing everything themselves. Be able to discern if you have the capacity to be in charge of a bigger operation. Maybe you need additional training before taking on bigger tasks.
• Establish better control and monitoring systems. Since you will have more things to supervise, you may not always be present or have the time to check on things, especially if you will be putting up a new branch. It is necessary to have a way to prevent theft and to maintain standards. One popular tool to improve control is to put up CCTVs in strategic locations. For retail operations, getting a Point of Sale System is a good investment.
• Assess what it is that you really have to expand. Is it your location? Your people? Your inventory? Determine the actual need, as there are situations when it is better to outsource than to get additional manpower; same as it may be better to lease than buy real property, as this may need a higher investment. There are also situations when you need not get a bigger location. You can construct or buy higher racks so that you can have more storage area to accommodate your inventory, instead of leasing or buying a bigger space.
• Assess the competitors. Don’t be a copycat. When you see a competitor expand its operations, study it first so you won’t commit the same mistakes. It may turn out that fast expansion was fueled by personal funds, and not because the business was profitable. Also, whatever it is that they are doing may not be applicable in your situation. Always consider if you will really earn or be able to repay your loans later.
• Check if you have sufficient funds to grow the business. Consider finances in your business planning. Make sure you have the budget to expand the business; if not, consider getting a partner or study if you can get a loan from the bank. Remember that while you grow your premises, additional expenses will also be incurred for additional manpower, marketing expenses, acquisition of machines and other supplies.
• Consider franchising your business. This is the fastest way to grow, as you can achieve greater expansion by using other people’s money. Just make sure that you are able to present a good operating system to get others interested in your business.
• Consider buying other companies. This can give you instant growth but be very careful that you are not buying unseen liabilities. To avoid or minimize this complication, many companies buy only the assets of the firm and not the business itself.
If your current business is really doing well, and you have saved enough money in the bank, I would recommend that you put diversification in your list of options. You may have earned a considerable amount, but you must not put all your “nest eggs” in one basket.
Having a big business is a dream come true. But make sure that you can handle the pressure. I’ve seen so many businesses that grew really fast, but later crumbled due to lack of preparation. Slow and steady business growth is much better, than growing so fast, so soon.
*Originally published by the Manila Bulletin. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.
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