What is the right time to expand?
One of the hardest decisions a small business owner has to make, is if and when to expand the business. Should I expand now or later? Will I generate enough new income to cover the additional expenses? Shall I hire new staff? Part time or full time? What if the growth doesn’t continue? And so many other questions that might keep you up at night.
- The first major hurdle every business has to conquer is to reach the “break-even point.” That’s the time where the business produces as much income as expenses.
- The next hurdle you must overcome is the point in time when the business out grows you. It reaches a point where you can no longer manage all the tasks and work by yourself. You need help, larger space, better equipment or a host of other “triggers” that will let you know it is time for expansion.
What are the business expansion “triggers” you should look for?
- You can no longer fill customer needs in a timely manner. If customers are leaving empty handed or going to your competitor because you are “too busy” then the time has come to do something.
- Employees can no longer keep up with production demands. They begin making more and more mistakes and missing deadlines.
- Absenteeism increases and production falls.
- Due to the increased pressures of your job you begin making poor business decisions or using a “quick fix” for problems that need long term repair.
I can also almost guarantee that the decision to expand will have to be made at the worst possible time in your business life. So, prepare for that day now and it will go a lot more smoothly.
- Do your homework and do all the necessary number-crunching:
- Prepare a budget, what is your break-even point after your expansion?
- Have your overhead and your profit margin been accounted for properly in your billable hours, fees or product cost
- Make sure you plan for how your own schedule will be impacted
- More time needed to supervise your new staff
- More time needed to manage the business
- Even with thorough preparation, the expansion will still face challenges:
- The transition will take more time than you planned for
- There will be extra expenses you hadn’t anticipated
- Some things simply are not going to work
- Other unrelated challenges will require your immediate attention
Growth isn’t for everyone. Some small business owners are content with a “mom and pop” business and will never have anything else. Others want to be the next Microsoft.
Or of course if you think that all this planning, research and number-crunching is not for you, you could follow my example:
- I had no experience when I started 20 years ago
- I just blundered along from one mini-crisis to the next
- I hired people in the beginning who knew more than I did, but were certainly no experts
- I worked ridiculous hours
- I undercharged for my services for many years
- I did minimal planning and minimal research
- It was just dumb luck that I acquired great clients
- When I was nearing a real crisis I joined a BNI chapter
- The business coach I hired, quickly pointed out what I should have done 20 years ago
- And now with some proper number crunching and future planning, my business is expanding rapidly again
One last thought.…..
Make sure that you take care of your health, your family and that you continue to have fun running your business. There are more important things in life than building a business empire.
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