In this article, youâll learn:
- The benefits of expanding a business
- When you should expand your small business
- Things to consider before expanding your business
As a small business owner, you spent a lot of time getting your business off the ground and making it a successful venture. Part of your business journey is knowing when to expand your small business.
Typically, it’s more evident in the beginning when you should expand your company. But as your business gets farther along, itâs not always as obvious when a business expansion is a good idea.
So what are the telltale signs that reveal when you should take your business to the next level? Letâs find out!
What are the benefits of expanding a business?
The primary benefit of expanding your small business is clear â more revenue for your business!
But honestly, itâs about more than that.
As a business owner, you have to be constantly thinking ahead. If youâre customer-centric, you want to be thinking about more and better ways to serve your customers, and how to add more customers to your portfolio. And of course, you also want to be thinking about your rivals, and how to make your company sustainable even when there is fierce competition.
Here are some advantages of expanding your business:
Expanding your business can attract new customers.
If you add new products or services to your business or open a new location, you’ll expand your customer base. Some businesses have only a few repeat customers, which can be detrimental if you lose some along the way. Having a diverse group of clients offers better financial protection for your business.
For example, if you own a coffee shop that serves mostly morning work commuters, you can attract new customers by adding deli items for lunch or expanding your hours later into the afternoon.
Or if you have a dry-cleaning business located on the north end of town, opening a pickup station at an underserved location at the south end can expand your customer base and bring in a new revenue stream.
New products and services will also enable you to offer more to your current customers and deepen their relationship with you, while also attracting new customers who might not have considered you before.
Expansion can bring more value to your small business.
For instance, if you have a product or inventory-based business, buying in larger quantities or ordering more from your vendors might allow you to capitalize on volume discounts.
Most suppliers offer lower prices when you purchase higher quantities. That means you will pay less and increase your profit margin.
Or you can pass those savings on to your customers, which could bring more value and a competitive advantage to your business, likely increasing patronage and revenue for your company.
Growing your business can offer you multiple revenue streams.
Business expansion has the potential to generate new revenue streams as you offer new products and services.
If you have relied on a primary service or product for your business, adding others can help you offset losses during downturns.
For example, if you have a landscaping business that thrives in the warmer months, adding a snow removal or salting service in the wintertime can significantly extend the amount of time your business brings in solid revenue.
Or letâs say you have a product-based brick-and-mortar business. You might consider expanding your business model to an online marketplace, such as Amazon or your own eCommerce store. Doing so can help you reach new markets and offers unlimited potential.
In the end, a business expansion can bring sustained revenue to your business for the long term.
When should you expand your small business?
Now that you realize the benefits of expanding your business, you may want to move ahead with your expansion plans. But you want to do so when the time is right.
When your company was a new startup, it was more apparent when you needed to expand. Maybe it was just you working out of your house, and you needed to hire your first employee and open an office space. Or maybe you had a storefront and quickly realized you needed more space to fulfill the needs of your customers.
As businesses mature, expansion opportunities may become more complicated, and business owners may feel more distracted and less sure about taking on the additional risk that comes with expansion. So how do you know when itâs time to take that step?
Youâre unable to serve every customer in a timely manner.
Sometimes a small business grows faster than anticipated. On one hand, thatâs great news! But if your business has grown so fast that customers are waiting longer than they should for you to serve them, it might be time to expand.
For example, if you own a restaurant and constantly have customers waiting for an available table, you might consider expanding your restaurant space, adding more tables, or hiring new employees. In fact, you may have to do all of these to meet the growing customer demands of your business.
Or letâs say youâre an air conditioning and heating contractor and often have to put clients on two-week-long waitlists. It might be a good idea to hire another repair technician to help your business get to customers sooner.
You need more room to serve your customers adequately.
No matter what your industry is, you need to be able to operate it comfortably for you, your employees, and your customers.
For instance, if you operate a walk-in medical clinic and have a higher patient load than your staff or your building can handle, it may be time to bring on additional staff, get a larger building, or open a new location.
Note that before expanding your business space, youâll want to evaluate the pace of growth or demand that you see in your business. Has your business only been operating at or above capacity for a short time because of a seasonal trend or temporary increased demand? Or has it been busting at the seams for some time? The latter is a sign that expansion is overdue, and itâs time to move forward with your plans.
The perfect opportunity comes along.
So imagine that your small business is considered second-best in the market where you operate. Only one other company has more of the market share, and itâs been open much longer than you have.
The other business owner decides to retire and sell his company, right along with all of his trade secrets, inventory, and products. He wants to find someone who will keep his staff on and keep the business going uninterrupted out of loyalty to his long-time customers. The business owner is even willing to train the buyer of the business and stay on for a while to ensure a smooth transition.
Youâve looked at the metrics. Buying the business would quadruple your revenue. The only thing you need is a business loan to make it happen.
A scenario like that would be a once-in-a-lifetime opportunity for you. Itâs a no-brainer that you would want to buy it without giving it a second thought.
Expanding your business makes sense when an opportunity comes knocking at your door. But sometimes, other new opportunities present themselves that arenât so cut and dry.
Either way, analyze every opportunity to decide if a business expansion is right for your business.
Itâs time to break the cycle of complacency.
Nearly every business owner gets to a point where they are comfortable. Itâs often after years of blood, sweat, and tears and struggling to find what works. Then comes that âAaahhâ moment when you can breathe and relax.
That is a great milestone in every business ownerâs journey. But staying stagnant for too long can also be detrimental because it usually means you stop growing your business. Consider Bilal Bhattiâs story.
Today, Bilal is a successful entrepreneur who owns and operates multiple food franchises across several states. But he wasnât always happy with the speed at which his business was growing.
âMy business was at an idle state and not operating at the fast-growing pace I desired. I was not able to grow my business, and I needed money to help with both expansion and general working capital,â said Bilal.
Thatâs when he reached out to Biz2Credit to fund his business expansion plans. Now, he has a thriving franchise empire.
Perhaps Bilal realized that if youâre complacent for too long, your business will never reach new heights.
Eventually, business owners need to look ahead and push forward to ensure their businessâs long-term success. When youâre at that point, itâs probably time to consider expanding your business.
You need to leverage new skills or technology.
The business world is moving at a lightning-fast pace. Undoubtedly, you are great at running your own business, but new technologies and innovations are being created and discovered every day. Itâs important that you keep up with the trends in your industry.
For example, the field of dentistry is continually coming up with new ways to diagnose and treat patients. Next year, there may be novel imaging equipment that can more painlessly make x-ray impressions of your patientsâ bites. Or a new laser technique could come along that offers more painless drilling.
Whatever industry you serve, todayâs consumer demands to be part of cutting-edge technologies or trends that can better serve them.
Sometimes, expanding ways to serve your customers better is vital for your small business to thrive and survive.
Your customers are asking for it.
Sometimes the answer is already staring you in the face. If your customers have consistently asked for a product or service you donât yet provide, maybe itâs time to consider giving them what they want.
You may already receive those kinds of inquiries when a customer visits your business. But you can also learn what customers want by reading through your businessâs social media comments (or even the comments on your competitors).
As an example, if you own a bed and breakfast and get lots of questions about accommodating onsite weddings, perhaps it merits some thought.
In a case like that, maybe it would be time to reach out to a loan provider for funding to build a wedding venue on the property.
Again, whatever market you serve, take note of what your customers want and are already asking for.
What should you consider before expanding your business?
If youâre now considering expanding your business, there are just a few quick points to consider before making it official. After all, you want to have a clear path to success as you grow your business.
- Define your goals. Just as you had a strong business plan before you went into business, youâll want to outline a new vision when expanding. Is your goal to improve quality, increase revenue, offer a better customer experience, or decrease the load on your staff? Once you identify your goals, youâll be able to come up with a plan to meet them.
- Research your market. If youâre planning on a major overhaul, opening another location, or serving another demographic, youâll want to perform competitive market research and ensure there is a need for any new services or products you plan to offer.
- Ensure that your vendors can meet your needs. If your expansion means youâll be placing larger orders or offering new products, youâll want to contact your vending partners to ensure they can adequately meet your needs. If not, it may be time to seek new vendors.
- Explore funding options. Itâs not every business that has the cash flow needed to fund its expansion. Most small business owners get a small business loan to help fund the purchase of new real estate, renovate their existing space, purchase new equipment or inventory, or bolster their working capital to meet their new business expenses. Itâs always a good idea to consider your financing options before you apply for a business loan. That way, you can ensure that you have everything you need when it comes time for financing your expansion.
Entrepreneurship takes lots of strategic planning, but when all is said and done, itâs a rewarding venture that can afford you many opportunities.
While growing your business is part of the business journey and is an exciting prospect, it is not without its challenges.
Knowing when to expand your small business requires astute planning and consideration. But leveraging business growth opportunities can be one of the wisest things you do as a small business owner.