As an entrepreneur, it’s exciting to experience success. A few great sales months can put you in the mood to expand, but you should do some careful planning ahead of time to make sure you’re ready for that major step.
What Do Your Customers Think?
If you have a strong customer base, it’s a good indication that you’re doing something right. If they are asking you to open closer to their part of town, you might have enough of a demand to add a location. Poll your followers via social media to allow them to give you valuable feedback.
Your business really needs to have been profitable for three years or longer. Steady growth in sales is a good indicator that the trend will continue. Your market or industry should be showing some business growth as well. As long as your industry or your market is expanding, your odds of successfully expanding are much higher. A positive cash flow that also happens to be steady is yet another prime indicator that your business model will succeed in another location.
If you employ a loyal group of people without a high turnaround, that’s another good sign. If your time management skills are up to par and you seem to be adding more staff every year, this should coincide with your rising profits. If so, your business might be able to afford the expansion.
Other Questions to Ask Yourself
Here are a few questions you can ask yourself about your business to determine whether your business growth warrants expansion:
- Do you have documented processes for training employees?
- Do you have documented processes for management, including financial procedures, safety procedures and emergency plans?
- Can you ensure consistency as well as quality across your brand at a separate location?
- Have there been several requests for a certain product or service?
- Do you need more room at your business?
- Can you handle the workload, or do you need more employees or more equipment?
- Is it difficult to get projects completed on time and on or under budget because you’re too busy?
- Are there more target markets you can tap?
It all comes down to financial efficiency. It’s great if your business is profitable with the practices you have in place. In addition to those things, however, you must also have:
- Strong sales over the course of at least three years
- Consistent cash flow every month or season and
- Loyal, repeat customers
When you can pass those three major parameters and you have the drive to do it, you can start planning your expansion. It might take some time, but you’ll be better prepared when the day comes for business growth.