How to Know When Your Business is Ready to Expand

Taking your business to the next level is the dream for many entrepreneurs and business owners. You’ve done the work to establish yourself in your market, you’ve had some wins (and, more than likely, a few setbacks that you’ve overcome), and you want to know if now is the time to expand. But you can do serious harm to your business if you expand too quickly. Whether adding employees, increasing office space, upping production or expanding services, doing too much too soon can have catastrophic consequences if you’re not prepared.

Expanding your business is not unlike launching it. It takes a similar “leap of faith” mentality, and while there are no perfect solutions, below are some key metrics to look at when considering expanding your business.

You Have the Right Team

One of the first things you should look at when considering whether to expand your business is your team. These are the people who will be going through that process with you, and you need to be confident in their abilities. Your team needs to be able to handle new demands and challenges. As your business expands, you will be forced to cede more control to others in the organization – particularly managers and others in leadership roles – and you must be able to trust them to make decisions. Longevity is also key. Who will be with you in three years? Five years? Do you want those people on your team as you move forward? These are essential questions for any business to consider as expansion looms. This goes beyond just your internal team as well. Your partners, whether they’re manufacturers, distributors or vendors (depending on the business you’re in), are also a crucial factor in your expansion. If your partners aren’t ready, or willing, to grow with you, your expansion likely won’t succeed.

Your Customers Want It

A strong customer base is critical, and repeat customers show that there is a strong demand for your product or services. It also tells you that the customers you’re serving are satisfied with the quality of what you offer. Have more customers been seeking you out? Do people from other regions ask when you’ll be able to better serve them (or serve them at all)? If you’re a retailer, for example, and customers are coming from miles away to visit you, then it may indeed be time to consider opening another location to service those folks who are making the trek. Sometimes customers will literally ask you to expand. And while this on its own isn’t enough to make the decision for you, it can certainly be a powerful indicator that you’re ready to expand.

You’ve Been Steadily Maintaining Profitability

There’s obviously no simple formula to determine whether your business is ready to expand, but a recent spike in profits doesn’t necessarily mean it’s time to grow your business. But if you’ve managed to remain profitable for a few years now – say, three years of profitability – that’s compelling evidence that you’re ready to grow bigger.

You Have the Money

Expansion is never cheap, so it’s crucial for your business to have enough in its coffers to go through the process. This means not only profits, as outlined above, but revenue, cash flow and financing as well. As your expansion ramps up, you’ll need the extra funds for unforeseen costs. You’ll also probably have to make investments that won’t see any significant returns for some time. Regardless of whether you receive outside financing for your planned expansion, profitability and cash flow are keys to any growing business. Expansion requires a strong financial foundation in order for you to succeed.

You Have Systems in Place

This one essentially boils down to a simple hypothetical: if you had to hand over your business to someone else, would it survive? If not, you probably aren’t ready for expansion. As hard as it can be for a hands-on business owner or entrepreneur to let go and delegate some of the more important aspects of the operation to others, it’s also one of the keys to a successful – and growing – business. If you had to hire four or five new people in the next two weeks, are there proper processes in place to train them? If your sales doubled next week, would your team be able to handle it? If the answers to these questions is “no”, then you probably aren’t ready to expand just yet. Just winging it (so to speak) can work for a small operation, but documented, standardized practices for training, sales, and other areas are crucial for a growing business. You have to be able to replicate your success without personally overseeing everything and making every call (as that won’t be realistically possible), if you want to successfully expand.

You’re Setting (and Meeting) Your Goals

If your success is at least partly because you’ve set goals for your business and you’ve been able to consistently hit them, that’s a major sign that you’re ready to expand. It speaks to your ability to plan effectively and realistically, and also that your business model works – both good indicators that your enterprise is poised to take on the challenge of expansion. That said, you must also be sure that growth in your market or industry is positive, and you’ll also need a proper (and meticulous) sales and marketing plan ready to go for this new market. Demonstrating the ability to meet clear, well-defined objectives builds confidence in your company’s ability to expand, both internally and externally.

It’s very important to be honest with yourself about whether your business is ready to expand. If now doesn’t seem to be the time, don’t force it. Make a plan for measured growth and follow through. Build and shape your team, grow your customer base and your profits, and develop your systems. That way when you are ready to expand, you can do so with a reasonable expectation of success.

Justin Anderson | Contributing Writer



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