Many of the biggest corporations in existence started with one location. Look at the amazing history of McDonald’s. The original roadside hamburger shop was a quaint little establishment. Decades of expansion turned McDonald’s into a global phenomenon. Small business owners should look at these big corporations for inspiration. A wise strategy of expansion could lead to great wealth.
This strategy must be well thought out though. Poorly devised expansions can lead to immediate bankruptcy. Consider it advisable to keep the following three facts of expansion in mind.
Expanding is Costly
Understand that expansion also comes with costs. The purpose of expanding her business usually centers on generating more money. Don’t assume overhead won’t increase significantly due to rapid expansion. Costs may even exceed double the first business’ expenses. Just think of the advertising budget. And establish business may not need to market itself as much. A new office opened in a new neighborhood, however, may rely on expensive advertising to draw awareness.
Draw up a detailed business plan and growth strategy before implementing any expansion ideas. The plan must incorporate proper budgeting. Managers may lack a clear awareness of expenditures. Now, an expansion may run into dire problems. Cash flow might not be at desired levels for some time. Expenses add up. So, the elimination of unnecessary costs must become a priority. Don’t let the already costly process grow out of control.
Expansion May Not Be Controllable
The scale of the expansion could take on a life of its own. Those in charge of running operations may find themselves stretched thin and struggling to manage the growing company. Some may think the idea of a company growing uncontrollably is an obtuse notion. After all, if you open three new locations, the business can’t create a fourth location on its own. True, but the three new locations could become busier than expected. Not meeting customer demand isn’t an option here. They’ll go elsewhere, which wouldn’t benefit the business in the short or long-term.
Hiring new employees and increasing facets of operations might prove unavoidable. Technology upgrades such as installing new computers and print management software might derive from increased workloads. Liabilities may increase creating additional insurance considerations. The ripple effect of expansion consequences can occur rapidly. Owners might be surprised to find new duties and obligations forced upon them. Embracing preparedness must become the motto of any entrepreneur interested in expansion strategies.
Expansions Involve Strategic Partnerships
The image of a toiling entrepreneur working alone in his or her home office isn’t always inaccurate. Many entrepreneurs often prefer to work alone. Even when they work with others, entrepreneurs may wish to keep interactions limited. During the inception stages of a business, doing so could be acceptable. When running a small business, the “lone wolf” approach could still work. As a company expands, however, things change. So does the entrepreneur’s reliance on working without strategic partnerships.
Strategic partnerships take a variety of forms. Hiring the right attorney or accountant — possibly the first retained attorney or accountant — involves a partnership agreement. The same could be true of any outsourced work. Hiring a third-party customer service entity to field calls and take messages requires careful deliberation. You want the best company on your side — one that works in harmony with your growing company.
And then there are more complex forms of partnerships. A company might need to enter into special arrangements with other companies to ensure continued success. Initiating and maintaining these agreements and partnerships requires special skills. Does the current owner and team possess these skills?
Scores of positives exist when expanding a business, but don’t think expansions always go smoothly. Challenges arise, and you must be ready to handle them.