Planning a business expansion is an exciting time for any entrepreneur. While there certainly is a lot of work involved, the potential benefit to your business should be enough motivation for exploring the opportunities available.
We’ll provide you with a roadmap for how to start planning your expansion by going back to the basics, the three elements you need to confront before you do anything and finish with the 9 steps you need to take to craft a stellar expansion strategy.
Before Expanding Your Business, Start With the Basics
Considering that we’re on the topic of business expansion, we’re assuming that your business is already in operation and is in good standing. As you’ll discover as we review the 9 steps to creating a business growth plan, establishing a business expansion plan for small entrepreneurs is quite similar to crafting your initial plan.
Use this time to revisit your original business plan to note where your business has evolved, what is no longer true or an initiative and determine what, if anything, needs to be changed. Conducting this exercise at the outset of your planning allows you to make the best decisions for your future.
How to Plan for Business Expansion
Once you’ve reacclimated yourself with your original business plan, it’s time to map out a business-expansion strategy. Expanding a small business requires you to consider three elements of business growth:
- Are you ready for a company expansion?
- Identify what needs to be expanded
- Prepare for the domino effect
Each of these elements challenges your business’s preparedness, as well as sets you up to take action once you’ve reviewed each factor.
Is Your Business Ready to Expand?
Timing is everything in business. Making sure that your business matches a handful of these criteria will help you determine whether now is the right time to expand your business.
You Need the Space
The most basic requirement of a business expansion can sometimes come down to one simple question:do we have enough space? If your office has each co-worker stacked on top of each other, or your small cafe is bursting at the seams, expanding to a larger space may be your next step.
Strong, Stable Customer Base
Whether you have a growing restaurant or a booming accounting firm, moving to a larger space or opening another location won’t make business sense without the security of a loyal group of customers. Having an ongoing dialogue with your best customers should help you understand how viable it is to expand.
You’re in Demand
The next best thing to having loyal, consistent customers is having people who want to become your customers. For example, if your restaurant has developed a following of foodies who are clamoring for you to bring your ideas to their town over and over again, you might want to seriously consider their invitations.
Unable to Meet Demand
If there is simply too much to get done in the time you and your customers expect, hiring additional employees will help your business improve response time and customer deliverables.
Steady Cash Flow
Funding an expansion is a capital-intensive process. If you’re not being paid on time, even if your business is experiencing an uptick in sales, your business has a cash flow problem. Before making any expansion plans, you need to solve this issue. This list of actionable tips should be quite useful for improving your business’s cash flow.
Three Years of Profitability
Patience, as it’s said, is a virtue. This wisdom applies to business, as well. If you’ve only just begun experiencing success that outpaces your revenue forecasting goals, you’d be wise to tamper your ideas of global domination. However, if your profits have steadily increased year over year in the last 36 months, you’ve found a winning formula worth testing in other markets.
Thriving Market Opportunities
When you were creating your business plan, you conducted market research and established who you would target (hopefully). With this research, you would have an idea of how much growth potential there was in your market and/or industry. If the industry is shrinking, you may want to consider pivoting your business; but as long as there is an opportunity and your financials are pointing up, expansion could benefit your business.
There is only so much time in a day and only so many things you can tackle at once. That’s why it’s vital to have trusted, knowledgeable employees who can support your goals when you’re not there. Whether they’re entrusted with leading a new location or maintaining the same level of success with another team, having reliable employees is essential.
For a business expansion strategy to be successful, having organized, repeatable systems in place that allow you to keep business interactions as uniform as possible is a key segment of being successful. Without these practices, your expansion will run the risk of inconsistent user experiences (both internal and external) through disparate IT systems at each addition location—a risk that can impact the customer experience and business productivity negatively.
Identify What Needs to Be Expanded
To be successful as you grow, you need to determine which portions of your business need to be developed to reach your goals. As we learned in the previous section, expansion to your business will most likely be quite different from your neighbor. For example, a retailer may want to expand their business by increasing its brand footprint and selling their products in other outlets while a pest control business may see expansion as adding additional employees and equipment. Expanding your business is meant to increase your organization’s efficiency, allowing you to maximize every effort around driving revenue.
Consider the Domino Effect
At its core, expansion involved a series of decisions designed to affect change. While many of these shifts are intentional, there will be some changes which impact the organization in ways you may not have anticipated. The best course of action during this planning period is to ask, “what if?” for a myriad of scenarios and circumstances. While it’s easy to plan and practice for some of these situations on paper, once they’re introduced to the variables of the real world, your strategy will be put to the test.
For example, if you operate a flower shop and plan to expand into new territory with expedited delivery, you’re going to need to hire more people and potentially add additional vehicles. On top of the additions to equipment and employees, your logistics and inventory demands will be augmented, too. You’re adding significant upfront costs to your business with the intention of capitalizing on increased revenue opportunities. While it’s worthwhile to pursue additional customers, it’s possible that you will need to bring on part-time help to see your business through the first few weeks and months of your business’s expansion. To determine the best approach for you, identify the procedures and activities that will need to be addressed to be successful.
9 Steps to Creating a Business Growth Plan
As we’ve learned, there are a few different steps you should take before actually developing a business growth plan. Once you’ve answered all of the questions and addressed all of the pieces associated with determining whether you’re ready to expand, it’s time to document your approach.
Here are the 9 steps you should take to create an outstanding growth plan:
Open with a statement that encapsulates everything that is outlined in your business expansion strategy. Since this summary sets the tone for your entire growth strategy, we recommend that you write this once you’ve written and expressed each component.
This section is where you will both reiterate and potentially redefine your business’s purpose and mission statement.
Answer questions that address:
- How your expansion will allow you to stand out from your competition.
- How it will position you to both excite current customers and entice new ones to explore how you can improve their lives.
Product and Service Description
Treat this as a means of further describing how your expansion plays into your purpose and mission. Outline your products and services and how they will be augmented by the expansion, especially any new or increased benefit to the consumer.
Market Analysis and Strategy
In this section, you will begin to introduce some context about your industry, the growth trends of businesses operating in the field and how you intend to capitalize on this information. These details are meant to educate potential investors and lenders who may not have first-hand knowledge about a specific sector.
From the advertising and marketing side of things, you’re looking to establish your strategy for increasing customer awareness, consideration and acquisition through things like customer experience and strategic partnerships. It would be wise to include your proposed promotional budget for these initiatives, as well.
While you want to put your best foot forward, your goal should position anyone viewing this plan to ask relevant and pertinent questions concerning your strategies. The more honest you are in this section, the better you’ll be positioned to seize any opportunities in front of you.
Business Organization and Roles
In any expansion, investors and lenders will want to know the key players and how you intend to structure your business for the next chapter. Outline who in your business will be tasked with what, and why they’re uniquely qualified for that position in the context of your organization. It would also be sensible to map out how each department in your business will affect another and how, together, they will produce results.
Here, you’ll provide a detailed rundown of how your business has operated in the past and how you intend to function during and after the expansion. Provide a framework that clearly shows where the most time is spent in your business and how time, as a whole, can be better utilized moving forward.
Detail Your Success
As you move into the final portion of your growth plan, you want to demonstrate the success your business has experienced so far. The achievements you include in this section should paint a picture that anyone reading can digest quickly with a firm understanding of how you’ve reached the conclusion that expansion is not only attainable but the logical next step.
Provide Your Financial Outline and Projections
In the final section, you’ll include five key elements of securing funds to expand your business. These components are:
- Cash flow projections
- 12-month profit and loss projections
- 3-5 year outline on productivity retention
- Estimated expenditures balance sheet
- Cost analysis
While not officially part of the expansion plan, the appendix is useful for supporting specific assertions you may present in certain sections, providing resumes, legal documentation and other letters of support. Essentially, the appendix is a catchall for any information that may be beneficial to your cause.
The Final Word on Business Expansion Strategies
Deciding to expand your business is a big decision that allows you to pursue greater revenue opportunities. It challenges you to take a hard look at your business’s past and present, as well as what opportunities may await you with the right decision-making.
Expanding a small business takes a considerable amount of effort, time, planning and working capital, but the rewards can be quite fruitful. While each of these elements is essential for taking your idea and turning it into a reality, time is arguably the greatest factor of them all. Getting the timing right allows each element to be maximized to its fullest potential.
While it’s a calculated risk, moving your business forward is one many entrepreneurs have done before and will do in the future. The best thing you can do to succeed is to study the past and do everything within your power to realize your goals.