As a successful entrepreneur, CEO, or business manager, you know that taking your business to the next level in its development is not much different from launching it. The same considerations and dedication are essential for an expansion to be successful.
Depending on the size of your business, expansion can be as simple as hiring your first employee. Growing your business depends on a wide range of circumstances. Economic forecasts, market considerations, and the business cycle all play a role. Other factors in play include the availability of reliable shipping and transportation, labor markets, and access to raw materials.
Determining the best time to expand can be tricky, but if you know the signs to look for, the decision becomes much easier.
#1. The Customers Demand Expansion
Repeat customers are an indication of ongoing demand for your products or services, as well as satisfaction with what you offer. Loyal customers will request expansion, whether it is a store closer to where they live, an online site or even a local warehouse for faster shipping.
Consider all options before following through on customers’ requests for expansion. Your budget has to be able to sustain opening another facility, adding a line or hiring more employees.
#2. The Business Is Busy
Management and staff may find they are too busy too much of the time. If people feel as if they’re spread too thin, then you have more business than you can handle. If the company is not a seasonal phenomenon but year-round, then expansion is in order. Managers who consistently wonder if they can complete their work are managers of a business which must grow.
Expansion is not just increasing the number of employees or shifts—although both of those decisions can pay off. Expansion is finding the next level for the business.
In considering the right number of employees, consider the “Rule of 150.” Businesses and anthropological research find that when the size of a firm exceeds 150 personnel, it changes in culture and quality. Below that number, the structure is much less hierarchical and far more flexible. Above 150, the structure becomes slower and less reactive.
Gore-Tex famously builds a new factory when the staff at one reaches the 150-person level. 150 people is about the maximum number a leader can stand on a chair and address directly before “speak louder” calls begin.
#3. The Business is Out of Room
Physical expansion is indicated when there’s no room left in the workplace to function efficiently. People can tell when space is cramped, even before accidents caused by limited space occur.
Poor staff morale is an indicator as is lower production. Meeting clients away from the office because no room exists is another sure sign of needing more space. Clutter and mess are another — everything should have a place and be in its place.
Try reorganizing before relocating or using flexible work hours if possible so employees can share workspaces.
#4. The Team is Solid, Capable, and Ready
Expansion requires people who have bought into the business. They are personally invested in the success of the business and want it to get to the next level — they see that as a way of increasing opportunities for themselves.
With a talented team in place, your company can consider expanding. Talented employees may end up relocating to branch off and create their own remote team, adding further value to the business. Some may decide to take on a new product line. Whatever way your expansion takes place, having people who are part of the team before it takes place — especially if new people are being brought onboard — will make the expansion’s success more likely.
Some employees may be unable to relocate, prefer to work on the floor than be in management or dislike additional responsibility. Don’t assume your team is ready for expansion. Canvas them for feedback.
#5. The Market Is Growing
Businesses in a growing market will face the demand to expand. With more customers, businesses find that current operations are strained. They may even be turning away customers.
Study the market conditions carefully, and make sure this strain is not a temporary or seasonal issue. See what competitors are doing, especially if some customers have transferred their business to them.
#6. Developing New Lines of Business
Enterprises develop new lines of business frequently. Many of those new lines are variations on existing ones or are logical extensions of them. For example, a retail men’s clothing store may add accessories, jewelry, and drink glassware into its offerings. A logistic supply company known for cartons and drums may add shrink-wrap, tape, and green shipping solutions to their lines.
New lines of business are as much an expansion as building a new factory. They should fit smoothly into your current marketing model—or the model needs to be adapted so that all lines work within it.
Use focus groups to research if a new line will work. You might think it is a great idea, but the market may disagree.
#7. You Have the Capital
For a successful business expansion, you need sufficient cash flow to cover unforeseen costs and investments that won’t have a return on investment (ROI) for several months. Adequate revenue or financing to support an expansion is a good indication you are ready to ramp up your business.
But simply being profitable isn’t enough to justify expansion. Create a business forecast as a reliable representation of your company’s potential indicating the best and worst scenarios if you expanded. If the results between both forecasts are narrow, then it’s time to scale up.
#8. You are Meeting and Exceeding Goals
If you are meeting your milestones ahead of schedule, it might be time for expansion, especially if other factors like the right team, cash flow, and a growing market are in place too.
If you don’t have the money ahead of schedule it isn’t the time to grow even if you have met all your other milestones.
#9. You’ve Done Your Research
Whether it is adding another location, creating an e-commerce site, or expanding into a new market, do your homework first. If you have well-researched plans in place, it is likely time for growth.
Don’t rush into the next stage of development without extensive research.
#10. You’ve Outgrown the Local Market
If you’ve tapped out the local market, it may be time to consider another location or even an e-commerce site. Expanding into a different vertical will attract new clients and help your business grow.
Make sure you have explored every avenue locally because most people like to support businesses where they live and work.
#11. Follow Your Gut Instinct
The best entrepreneurs and CEOs have an instinct for good business. Don’t allow success to overshadow that instinct. Always explore your hunches, even when business is a little slow. Successful entrepreneurs can identify market services and products that are not being met, or have an eye for just the right location. Knowing exactly when the iron is hot enough to strike is a trait only the most successful capitalists possess.
You may experience failures from time to time, but trying again is what makes a successful entrepreneur!