Should I Expand My Business?

• Demand overtakes supply – is production running at full capacity? Are employees working overtime constantly? Are there too many tight deadlines close to each other all year round? If demand starts to outpace supply, then expanding your business is a natural progression. At that point, it’s important to bring in more resources or find more places to put your products in order to serve more people. Additionally, if customers are going to competitors because your team is too busy; a business expansion strategy needs to be put into place to expand the business and reach customers’ needs effectively.
• Positive cash flow and profit – A surge in profits isn’t necessarily enough to justify business expansion since this could be temporary or a seasonal pattern. However, steady profitability throughout the year is an indicator that you’re doing something right and that your business model will work elsewhere. Likewise, positive cash flow is vital to expanding your business to ensure there are no arising debts. 
• No growth in your chosen market – Your product or service may reach a saturation point in the market and there could be similar or cheaper competitors’ products elsewhere. If so, now could be the time to research into other potential markets or consumer clusters before sales start to fall. You could look into market development strategies that seek to sell your existing products into new markets. This could be through new geographical markets, different pricing policies or even new distribution channels (through website or retail).
• The market is growing – It’s important to always review your market on a regular basis in order to keep track of any changes. If you find that the industry is expanding, there’s clearly a demand for your product and service. Nonetheless, market research should still be undertaken to review whether the expansion is feasible and not just a temporary phase.

Once you have established a route to expand the business either internally or externally, it’s important to revisit the business plan to make sure the expansion plan fits with your goals. It’s important to think about the risks as well as the opportunities since this could affect the operations of the business. By acknowledging the risks, you can seek out solutions, learn from others and gain more confidence in your business expansion strategies. Therefore it is crucial to bear in mind the following:

• Capital – Do you have enough money to expand? Not only does this require personal time, but also investment of money. You need to study the financial benefits as well as forecasting whether there will be enough cash to finance the business each month. For example, increasing your number of customers may increase sales but if the cost of getting those customers is too high, or products are left unsold, overall profits may fall.
• Competitive risk – if you’re pushing products into a market that you are unfamiliar with, this may cause unforeseen results – especially if you come up against aggressive competitors. Therefore, comprehensive competitor and market analysis is vital to ensure that the expansion into the new market is as smooth as possible.

Deciding whether or not to expand your business is not reliant upon how long the business has been established, but on whether the owner has the necessary capital and time to put the operations into place. However, as a business owner, be aware that time needs to be allocated in researching current market conditions, the customer base, and competitors in order to create a business expansion strategy for sustainable growth.

Businesses often underestimate the amount of cash and time that will be needed to break into a new market, therefore plan and forecast as far ahead as possible.

Does your business need to expand to a larger office? See our available commercial and industrial units to let.

Looking for more inspiration? See our blogs:

• A Guide to Choosing Business Premises
• Writing a Business Plan
• Tips from a Serial Entrepreneur