Expanding your business can be both an exciting prospect and a daunting challenge. An upcoming expansion may indicate your company is profitable and successful, but at the same time, it requires careful thought, planning and execution.
To say the least, it’s important to get it right. Plenty of companies see major success by building up the business, but companies may also risk financial troubles from expanding too quickly.
For example, one study found that two-thirds of the fastest growing companies ended up performing worse long-term than companies growing more slowly.
Signs you should expand
So how do you know when is the right time to expand your small business? Here are four indicators that it could be the right time.
1. Loyal customer base
If you’ve built a strong base of repeat customers, this could be a sign that it’s time to expand. Repeat customers provide recurring revenue that stabilizes your business, and strong customer loyalty demonstrates a demand for your product or service.
However, a rush of one-time customers doesn’t necessarily mean you have a loyal customer base. Rather, it could just be due to a temporary fluctuation in the market.
2. You can no longer meet demand
Do you regularly turn away new customers because the demand is higher than your current capacity? Expanding your business can make it easier for you to meet this demand. However, you’ll want to make sure this is a true result of increased demand and not just poorly run processes within your company.
3. There is growth within the industry
If your industry is gaining popularity, then you should consider expanding your business to meet the industry’s consumer growth. Spend some time researching industry trends to see if your industry is on the rise.
4. Your business is meeting and exceeding goals
Every business starts out with a plan and milestones they hope to reach. Once you start regularly meeting or exceeding these goals, it’s probably time to expand. However, you need to have the right partners and systems in place to meet these bigger goals.
If you’re ready to expand your business, you’ll likely need to consider how much working capital you have at your disposal to keep up with the growth. Make a cash flow budget that factors in your potential growth, and ensure you’ll have the right financing in place. Now could be the perfect time to discuss options with your funding partner to get your growth strategy in place.