6 questions to ask before starting a business expansion project
When running a small business, it is important to consider what is next for your establishment. In many cases, this could mean starting a new venture that will elevate your business’s products or services, like a business expansion project. While expanding your business can be a great way to earn more sales and expand your customer base, there are many components to contemplate before getting started.
Whether it is expanding a current location’s size, or opening an entirely new establishment, having additional space to grow your business can be beneficial. In this post, we’ll provide six questions regarding a business expansion that you should be able to answer. By reflecting on these questions, you can determine if this is the right time for your business to move forward with a business expansion strategy.
1. What am I going to achieve by expanding? Before expanding your business, you should think about how it will potentially grow your business. Do you need more space to meet customer demands, or are you trying to roll out new products or services, and need the extra room? Whatever your goals are, you should ultimately be trying to increase your sales. If your intentions aren’t going to do that it may be best to push off an expansion.
2. Do I have enough financing to expand my business? Prior to starting a business expansion project, it’s pivotal that you consider what you’ll do if things don’t go as planned. What if construction costs end up being more than you expected, or you’re forced to invest in certain areas of the project that you weren’t expecting to. If you run out of financing, the project could go un-finished, which could be extremely detrimental to your business. Don’t risk financial failure by incorporating a budget into your business expansion strategy. You should account for all costs that you know of, but also leave room for additional expenses. If you’re uncertain if your business’s bank account can finance an expansion in addition to your existing operations, it may be wiser to save up and execute this project in the future.
3. Will I be able to afford hiring new staff members? Expanding your business’s operations means hiring extra employees to manage your new space. This could potentially be an expensive and time-consuming initiative, as you’ll need to have funding to pay these employees, as well as time and resources to train them and ensure they are ready to work at your business.
Of course, expanding your business can be stressful, so chances are you won’t have a lot of time on your hands. Get help from an experienced, tenured employee who can assist in the interviewing, hiring and training processes.
4. How will costs increase permanently due to this expansion, and can I handle it? With an additional location also comes more bills, inventory, payroll (as mentioned above) and other costs. You may think that you have enough financing to pay for the expansion project itself, but it you’ll need to determine if you can afford the consistent costs that will come with it moving forward. Of course, a new or expanded location will hopefully also mean more sales, but you can’t assume that your expansion will be an overnight success, either. Take this into consideration, so that you’re not in financial distress later.
5. If I need additional financing, how will I get access to it? As we previously mentioned, starting an expansion process has its risks. One of them is that you could need to spend more money on the project than initially anticipated. It is essential to consider, if you do need extra capital, how will you get access to it? Could a family or friend lend it to you, would you apply for a business loan, or do you have an emergency fund that you could tap into? If you wait until the last minute, and don’t have a plan, you could risk halting production on your expansion.
6. Is this what’s best for my business’s future? It can be exciting to expand your business, especially if it means a prospect of increasing sales. Still, confirm that this is going to be advantageous for your business in the long-term. If you feel unsure about the success of the expansion, take time to think about how it will affect your business in the future.
Knowing how to expand your business in a financially astute and organized manner is important. By asking yourself these six questions, you’ll be able to better prepare yourself for the uncertainty an expansion can bring. If you construct a plan, have enough financing and are equipped to handle the costs and additional responsibilities, then it may be time to green light your expansion project!