The vast majority of copy written for small businesses looks toward the future. You will grow, your customer pool will get bigger, and you will become an international brand one day. You should be planning for your technological scalable expansion first to bigger teams, then to a bigger office, then multiple locations. But for you, in reality, the real question is not whether or not you should expand but when. Choosing the right time to become a bigger company is a matter of extreme strategy. Not only do you need to be making a profit, but you need enough of a profit that there is a cushion to skim off the top and reinvest into growth.
When you are pulling in a profit and seeing those positive numbers pile up, it can be incredibly tempting to expand immediately. This means that if there is a reason you should hold off, you want to know it right away so you can make the correct decision. Here are five reasons to look out for that will mean you should rethink expansion.
1) You’re Barely Beating Overhead
It feels good to slide from red to black, much less to see your profits increase a little each month. This is your golden time, the beginning of your launch, but it’s not the right time to grow. Expansion should happen when you already have a reasonable amount of surplus built up over several cycles and when your current production of profits can support any additional overhead created by the expansion itself. Remember that new space, equipment, staff members, and software all cost money and will continue to do so with every cycle. If you’re still just barely beating overhead, wait.
2) You Are the Center of Operations
Business owners are often incredibly independent people, perfectly happy to run many parts of the company all by themselves. However, as the company expands, it becomes more and more likely that you can’t do all of it alone. Delegation is necessary for successful expansion, especially if you want to add new departments or venue locations. If you are still the center of operations and logistics, consider starting the delegation and splitting-off process before actually expanding.
3) Success is Still Fresh
As your business gets its feet under it or as you’re recovering from a down cycle, it’s important to understand that your current ‘high score’ is not necessarily the new normal. Especially for startups beginning to launch, it can be tempting to start making speculations on how long you’ll continue to make money at the current rate and want to make plans based on these speculations. However, if you have been succeeding at the necessary income and profit levels for less than six months, rethink your expansion plans until you can confirm that you have a stable supportive income.
4) Your Logistics Need Work
It’s not uncommon for a small business to start doing quite well before you have your routine completely locked down. If you’re still perfecting your business plan and working on procedures with the employees, then the best thing to do is exactly what you have been. Growth, in this case, is holding still and getting good at the level you’re at. Solidify your supply chain, perfect your specials policies, and work out a solid daily and weekly routine with the staff to make sure every task is covered every time. When this is done, look at expansion again.
5) Your CFO Isn’t Sure
The final check you should do before making any serious expansion plans is to double-check with your Chief Financial Officer. Whoever runs your company finances needs to run the actual numbers on the cost of your expansion plans, the profits you have, the profits you’re likely to make, and any other expenses that will need to be considered. If the math shakes out, then enjoy your expansion. If your CFO thinks you should wait, consider your finances carefully before making a hasty decision.
It is the responsibility of every small business owner to determine the best way to invest your yearly capital. While profit is often a good sign that expansion is on the way, actually expanding should be done at the exact right moment when both the business and the market are ready for the change. If your business isn’t ready to expand this year, don’t sweat it. That just means that you can spend this time preparing the groundwork for expansion and perfecting the quality and efficiency of your business at its current size.