If you’re considering expanding your business, you might feel both excited and nervous. The opportunity to grow your company to new levels of success is certainly an exciting prospect, but it is also not a decision to be made lightly and without due thought. By planning carefully, you’ll be able to ensure as smooth a transition as possible and sustainable growth for the long term.
To assist you in your deliberations, we’ve put together a quick guide on what to consider as part of your business expansion plan.
Should you expand your business?
Benefits of Business Expansion
1. Increased Revenue
The most obvious benefit of a successfully expanded business is the increase in sales and revenue which will help you – as the business owner – make more money.
2. Market Diversification
Expanding into new markets, reaching new customer segments, or moving into new regions can help reduce the risks associated with being dependent on a single market and make your business more resilient.
3. Brand Reputation
Enhancing your brand successfully through expansion can assist in cementing your reputation as an industry leader and help to improve brand recognition.
4. Economies of Scale
One of the most appealing operational aspects of expanding a business is being able to take advantage of economies of scale. As a business grows, the cost of production or output per ‘unit’ can go down allowing you to make more profit.
Drawbacks of Business Expansion
1. Financial Risks
Growing a business and scaling it successfully often requires significant financial investments. Without a robust financial solution tailored for your needs, you could put undue strain on your cash flow or put the entire business at risk.
2. Operational Complexity
The larger a business the more complex its operations. From enhanced systems to deal with increased sales and payroll to additional logistics and processes, operational complexity often increases with expansion.
3. Market Uncertainty
Expanding into new markets may offer great opportunities but they also pose unforeseen risks and levels of uncertainty that can be difficult to mitigate.
4. Increased Competition
Businesses that rapidly expand can be subject to increased competition. The more a company is exposed, the more it will need to invest in marketing, sales and innovation to maintain the competitive advantage.
What to Consider in your Business Expansion Plan
There is no right answer when it comes to whether and how you should expand your business. However, we’ve put together a helpful list here to guide you in working through your expansion plan.
What does market research tell you?
Market research is critical for understanding the opportunity and potential in front of you. By conducting research you can ascertain the potential risks, the level of demand and the threat of competition to help make an informed decision.
How robust is your business plan?
Businesses should have an active, working business plan that outlines expansion strategies, financial projections, key milestones and the like. Without a strong business plan to back you up, it can be difficult to know how agile and scalable your business is.
What are the legal/regulatory compliance considerations?
This consideration will vary from market to market and industry to industry. Different states and countries may have different legal requirements and different industries will be subject to different regulations. Seek professional advice when considering the implications of market expansion for your business.
Do you have capacity to increase operations?
Expanding a business means more business. Assessing your operational capacity will help you work out what your current capabilities are and what plans you need to put in place to adjust and prepare for expansion.
What are your staffing needs?
Human resources is a big consideration. Think about your current staffing needs and your anticipated staffing needs. Will you need to hire and train new employees? Do you have the capacity for that sort of investment of time and money?
Do you have the financial resources to expand?
Expanding a business means that you’ll need to evaluate your financial resources and explore different options available to you if you do not have the funding. From new technology, equipment, assets, and infrastructure to advertising and marketing campaigns, there are numerous costs to expanding that your financial resources will need to cover.
Can you mitigate the potential risks of expanding?
All business expansion plans should identify and outline a management strategy for risks. Whether it’s competition with a strong advantage or high market share to geo-political considerations, the better you are able to recognise and plan for different risks, the better you’ll set up your business for success.
Putting Together Your Business Expansion Plan
Once you have worked your way through both the above considerations and your personalised business expansion plan, you’ll likely need to consider what sort of sustainable and accessible financing solutions are available to you to help fuel your growth.
This is where our team at ScotPac comes in. Our finance solutions are tailored by our specialists to fit the specific needs of each client. Our award-winning solutions and range of business lending and cash flow options are designed to help businesses succeed. Whether you’ve failed to receive approval for business loans in the past or want to explore alternative forms of financing such as invoice finance or asset finance, we’re here to help.
Business expansion can and should be a rewarding journey if approached with consideration and planning, and we’re here to help you do just that. To start an obligation and pressure free conversation, get in touch with your local ScotPac office today.