Deciding to expand a new business is pretty obvious and straightforward. After all, a new business has to expand from being an ambitious business plan to getting the first office space to acquiring the needed IT infrastructure, to hiring skilled labor, and to expand its market reach. All these expansions are nothing more than the needed threshold for getting a business off the ground, so there aren’t too many considerations to worry about.
Once the business is up and running, the choice to expand is not always so obvious. You have to view expansion in the right context if the growth is to be sustainable. You have to think of the capital you need to invest in the expansion vis-à-vis the projected return on investment. You have to figure out how you will satisfy new customers without jeopardizing the relationship you have with existing, long-term customers. You have to consider new locations and employees will integrate with the existing dispensation. You have to think of new and higher-quality products as well as the possibilities of increased innovation. All these are issues that will advise your decision to expand.
With that in mind, how do you tell if the time is right for business expansion? This article highlights five signs that you should look at when deciding if your timing is right for expansion. Before we dive in, it is important we mention that in case you intend to expand internationally, either to guarantee survival or to take advantage of a new market, you should expand through an international PEO, such as NH Global Partners. A PEO will offer you global workforce solutions and by so doing, offer you the opportunity for rapid expansion into new international markets.
Now take a look at these five signs:
1. Your customers’ needs have evolved
If a sizable chunk of your clientele is asking you to introduce a new line of products or to improve on your existing products, you should take that as a sign that it is time to expand. If your customers need a solution that you are unable or reluctant to provide, you run the risk of losing them to competitors. The good thing about this expansion angle is that it is the target market that identifies the problem for you, so yours will only be to create a solid solution; the answer that will resonate with your customers. Another sign that your customers’ needs might have evolved is when you find yourself struggling to meet supply and demand. That should tell you that the purchasing power of your existing customers has gone up and customer demand has gone up with it. It could also mean your marketing efforts are bringing in too much business for your current operation to handle. Whichever the case, you have to expand to accommodate the new business.
2. You have the right team for expansion
Your workforce has to be ready for expansion if you are to have a real shot at success. By ready here we mean having the right employees to fuel sustainable growth. Your line managers, department heads, and other senior employees need to have impeccable experience in managing an expanded team, as well as sufficient understanding of the technologies needed to drive growth. Your teams in charge of sales, finance, marketing, communications, and logistics, among other key areas, need to have a solid understanding of the prevailing trends in your niche. If you are sure that your current team will do well even with bigger, more demanding responsibilities, you definitely are ready for growth.
3. A lucrative opportunity is knocking on your door
A brilliant, lucrative new opportunity will present itself at a time when you have the money and expertise to seize it, and you will be unwise to let it pass by. However, this is a risky expansion angle to take considering that some opportunities can be lucrative but not feasible. Only expand if your business is stable enough to survive even if things don’t go as expected.
4. Your industry is evolving faster than your business
The industry you are in must never leave you behind if you want to survive in the world of business. If there are new industry trends you haven’t invested in just yet and your competitors already are benefiting from them, maybe you should consider expanding your business to accommodate those trends. It is always a situation of “adapt or die” in the world of business.
5. Your cash flow is steady enough for a bigger risk
If your company’s ability to generate and manage cash is impressive, it would be okay to start exploring new opportunities. However, if you are making profits but are struggling to manage it, it is best that you first get your books in order before taking a bigger risk. Note that business expansion comes with higher rent utility bills, higher inventory costs, more taxes, and a higher wage bill. Just being profitable might not be enough to sustain an expansion.
Expanding a business is exciting and interesting, but it can also be equally challenging. That is why you must ensure that sales are rolling in steadily, the profits are impressive, and your customers are happy before entering a serious growth phase.
Christian A. Kruse is a marketing and business expansion advisor for Asian markets in China.
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