How To Know When To Expand Your Business
By Tom Egelhoff
 Every business starts expanding with the
first day of business. Customers come inventories increase and
the business begins to grow. 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
expense. If you're not at this point yet.....(See: How
To Grow Your Small Or Home-Based Business To The Break-Even Level)
The next hurdle you must over come 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 its time for expansion. I can also almost
guarantee that this decision will 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.
In case you were wondering why I started this site here are
some remarkable stats. According to the US Census Bureau there
are around 180,000 businesses that have some form of multiple
locations. Another 5 million that have only one location. And
here is the most amazing one...nearly 14 MILLION businesses that
only employ one person. There should be a thousand sites like
mine to help the small business owner. But unfortunately there
is only one that I know of at the moment... this one
Business
Expansion: It can be good, it can be bad...
Most business owners hope their business will grow and be
successful. Others want to remain a one person business. They
left their previous jobs to start their own business so they
would no longer have to work for someone else. In addition, growth
can generate a whole new set of problems that most business owners
don't' want to deal with.
With growth goes more responsibility. Sometimes employees
that were able to handle certain levels of business are overwhelmed
by the new load of responsibilities. And so are you as the owner.
Now instead of your little one person operation you have;
delivery people, a part time bookkeeper, two or three full time
employees, someone to answer phones and take orders and counter
people or outside sales.
In addition to that add; absenteeism, employee benefits, vacations,
profit sharing plans, payroll taxes, higher overhead and increased
liability insurance.
Next problem; communication. With one or two people a quick
meeting has everyone of the same page. With multiple locations
a "team meeting" becomes a logistic nightmare to get
everyone together at the same time for information to be past
or training to be done.
Last but not least; This business is your dream. It's not
your employees dream. They have their own dreams that don't include
you. So you have leadership and motivation of employees to contend
with. (See:
How To Lead & Motivate:(Yourself and Your Employees)
What are
the business expansion "triggers" you should look for
How do you know when the time is right to kick the business
into high gear? Or, to use a much overused expression, when to
take the business to the "next level?" Are there signs
to watch for to let you know when the time is right?
Here are some of the most obvious:
- 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.
- Reaction to the competition.
If you are equal to your competitors then you may not need to
do anything. If, however, they are expanding and taking business
from you because of that expansion you should at least evaluate
the possibility of expansion.
Don' t misunderstand the above. I'm a big believer in "NOT"
reacting to every little thing the competition does. That's why
I advise you to "evaluate" the situation and not over
react.
- Changes in the marketplace
or industry. Your business
is affected by many factors. One of those factors is the very
industry you are in. Government regulations may force additional
equipment or other costly changes. New products or services might
force you to change the way you do business. In New York City,
newspaper stands are in trouble because people who used to buy
out of town newspapers now get the same information on the internet
sooner and for free.
- Customer perception
or your goods or services: Back in the 1970's seven
people died from taking Tylenol® which had been laced with
poison. Tylenol® reacted quickly to remove all their product
from store shelves. It took a long time to regain their leading
market share but they did it. But at sustained cost increase.
A whole new form of packaging had to be developed. Tamper proof
packaging had to be implemented alone with stricter inspections.
Not just at Tylenol® but all pharmaceutical companies had
to retool for this change in customer and government demands
for safety.
Are there
any ways to postpone expansion?
Yes. There are some short term measures you can take that
may buy you a little time before you must take the plunge. Not
every one works for every business but one or two will work for
most.
Here are a couple of things a business can do:
- The quickest and most cost effective, but most difficult
to do, is to become less wasteful.
The problem with this is that it requires absolute dedication
from all employees and that is sometimes very difficult to achieve.
- Computerize: You might
say, "That's really expensive." I can be expensive
but it's certainly less than more buildings or vehicles or employees.
- Streamline the procedures of your
company. Are any jobs being duplicated? Be more productive
with less effort.
- Increase training. Can
more than one person be trained to handle the same job? Then
you have a backup in case of illness or an employee leaving the
company.
- Reach new markets with
new uses for the same products you produce now. Arm & Hammer
Baking Soda is a cooking product, toothpaste, drain cleaner,
cat box freshener, cleaner and it keeps smells at bay in your
refrigerator. Find other markets for the new uses of your products.
- In some cases you can expand cheaply
by taking over part or all of the space next to you. This is
the least expensive and most popular way to expand a small retail
business. Find out whose leaving your center and negotiate a
new lease for the new space.
- License your products or services to others. You'll receive
a royalty payment for each product sold or service performed.
The last word on business expansion
Growth isn't for everyone. Some owners are content with a
"mom and pop" image and will never have anything else.
Others want to be the next Microsoft. Expansion can be tricky.
Expand to quickly or too much and increased expenses overwhelm
the business. Expand to late and your customer base has been
so deleted by your competitors that you don't have enough business.
As we come up on the new millennium it's the perfect time
to sit back and evaluate where you want your business to go in
the coming year.
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This article may be reproduced for your non-profit
group or organization provided it is not altered in any way and
the following is attached:
©1998 - 2004 Eagle Marketing PO Box 271 Bozeman, MT
59771-0271
http://www.smalltownmarketing.com - (406) 585-0219 - Toll FREE
(888) 550-6100
email: tommail@smalltownmarketing.com
Based in Bozeman, MT, Tom Egelhoff is the author of How To Market, Advertise & Promote Your
Business Or Service In A Small Town, and The
Small Town Advertising Handbook: How To Say More And Spend Less.
He is also a seminar and workshop presenter
and trainer. He may be reached at 888-550-6100 or PO Box
271 Bozeman, MT 59771-0271
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