Are You Ready to Expand Your Business?
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Your company is doing great financially. You have a healthy client/customer base and your bottom line is healthy. You’re seriously considering expanding your company’s operations. But are you truly ready to take that step? Before you make the leap it’s necessary to consider the practical, logistical, financial and legal aspects of growing a business.
Business Format
Many entrepreneurs begin their operations as sole practitioners or as members of partnerships. It’s easy to understand why this would be the case. Launching solo practitioner and partnership business structures require very little effort.
However, solo practitioners and partnerships share one very serious potential drawback: lack of legal separation between business dealings and personal assets. Expanding a business as a sole practitioner or as part of a partnership is potentially legally and financially perilous. A large loss sustained by the company could result in personal ruin.
If this is the case with your company, establishing a legal barrier between personal and business assets by reorganizing as a corporation or a limited liability company (LLC) is highly advisable before expanding your company’s operations. By doing so, creditors and others who may seek damages or other adverse legal action against your company cannot also attempt to drain your personal assets as well.
Banking and Financials
Even as an entrepreneur or small business owner, it’s advisable to begin to establish a separate financial life for your business operations. As a result, you may already have a separate business bank account, along with a Data Universal Numbering System (D-U-N-S) number, and other basic aspects of a business identity. However, if you are considering expanding your business, a thorough checkup of your company’s financial relationships is definitely advised to determine if other financial arrangements – such as a dedicated credit card — should be made beforehand.
Likewise, your business should have sufficient cash reserves along with a positive cash flow before undertaking expansion. While expanding your business is designed to generate more revenue, the growth process itself frequently involves substantial costs, including investments in office or manufacturing space, additional personnel and equipment. Sustaining the expansion process successfully requires having sufficient cash on hand (or access to credit) to cover the costs of expansion while maintaining the company’s regular operations.
Hardware and Equipment
Expanding your company’s operations frequently involves investing in additional equipment, office or operating space and even inventory. However, unless your company is awash with cash (and even if it is), it is unwise to make substantial upfront investments toward expanded production or sales without solid assurances that the additional capacity will be needed immediately. Nonetheless, it is also essential to be able to obtain the necessary resources to handle additional production or sales. Achieving this balance requires carefully weighing the requirements associated with expansion beforehand, and making necessary adjustments as your company’s expansion proceeds.
Personnel
Expanding your company’s operations frequently means hiring more employees, or obtaining the services of additional contractors. However, the success or failure of your company’s expansion plans is heavily influenced by the presence or absence of qualified leadership to guide the expansion process. Rank and file workers who are invested in the success of the company are also important. Finally, your company should have strong, established strategic alliances and working relationships with vendors and other entities outside the company who are nonetheless essential to the operation of your business.
Present and Potential Customer Base
Plain and simple, if you’re scrambling to obtain and maintain enough business to keep the lights on, your company is nowhere near ready for expansion. While it’s true that obtaining new customers or generating additional income is necessary to get a new business off the ground, hustling for new business is not the same as expansion. Instead, expansion should only be considered once your company has established itself in the marketplace and you have a reasonable expectation of receiving steady revenues.
A very good sign that your company IS ready for expansion is when prospective customers begin to seek your company out – either through word of mouth, your company’s marketing efforts or by any other means. This circumstance signals that your company has achieved sufficient prominence to serve as a catalyst for growth, according to a 2014 article in Entrepreneur magazine.
Established Online and Mobile Presence
Even if your company operates strictly through a brick-and-mortar storefront, an established online and mobile presence is essential to reaching new customers – especially among younger demographic groups. Among the most essential online elements: establishing a mobile-friendly website (or a dedicated mobile app). Establishing and maintaining reasonably active and responsive social media activity is also a must. Facebook and Instagram accounts are essential, although Pinterest, Twitter and LinkedIn are also beneficial.
Disclaimer: This article includes a general discussion about the various aspects of running a small business. It is not intended to provide legal or financial advice. Please consult with financial and legal professionals in your area with specific questions concerning your business.
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Posted In: Management, Money
