5 things to keep in mind before expanding your company
As an entrepreneur, keep asking yourself this question, are you building the company to sell it off in the next few years or are you here to play the game and leave behind a legacy?
The strategic plan for your business largely depends on this question.
“Growth is never by mere chance; it is the result of forces working together.” – James Cash Penny, American entrepreneur
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The decision to grow needs careful consideration. The business should be financially, operationally, and emotionally ready to take on this challenge. The key here is to first understand whether there are unexploited possibilities for the business to benefit from.
More often than not, this entire exercise of expansion is a play of resources and capabilities.
In this article, we aim to fully prepare you to take this challenge. Here are a few factors to consider before taking the leap of faith:
Every good thing comes with dedicated effort and pain. The first and foremost thing that you should consider is if your team is willing to do what it takes. Are they ready to take on additional responsibilities, work for more hours, and be willing to accommodate more people on the team?
If this is missing, you need to create the willingness. Share with them your long term vision and the roadmap to achieve it. Keep them motivated!
Logistics and operations
Expansion translates to entering new markets, new product lines, or a new business path. To be able to do this, your product should obviously be easily accessible to your desired target audience. For this, the operational coordination should be robust. Work hard to build a system to ensure availability and accessibility of the product.
A clear strategy
Strategy is laying a clear roadmap ahead for the company to achieve its vision and mission. Clearly define the vision (the ‘what’) and lay down the ‘hows’ to reach it. As an entrepreneur, you need to be read and research well to take calculated risks. Be clear about whether this is an experiment or a clear-cut attempt to throw competition out and seize the market.
Communication and customer connect
Check how your good is connect is with your target group. Most companies in their early days do everything to keep the customer happy, and during their expansion phase, they fall apart in terms of customer service. Take this crucial opportunity to build a rapport with your target group. Win them over to your side. Moreover, keep a crisp and single pointed communication strategy to create a clear positioning in the customer’s mind.
The last, but most important, factor to consider while expanding is to check and compare the financial position of the company. Create various financial models with expected revenue, gross margin, expenses, and expected EBITDA. Create expected cash flow statements and determine the exact amount of cash needed and at what rate can you afford it. Also figure out methods and timelines to pay back loans. Estimate the value of the company before and after the expansion and see how much value is being created and at what cost.
In the end, keep in mind that the expansion of a business can last for one to three years. During this time, many environmental changes may speed up or slow down the expansion. A constant review of the strategy is needed with a strong will to reach the destination you set out for.