Your business isn't going to grow on its own. If you're ready to expand, but you're not sure where to start or how to best use your resources, consider this a primer.
"You always have to invest in your business, and every business grows differently," says Bruce Clinton, a small business advisor and executive coach with BusinessWise in Madison, Conn. "It's more of an art than a science."
There's no one answer for every business, but you can use this guide to analyze what kind of spending is best for growing your business.
Start With a Budget
Before you can decide on an effective expansion strategy, you have to be sure you can afford it.
Reevaluate your business budget and see how much cash is available for investing in the next stage of your business. Start by subtracting your expenses from your revenues to get a handle on what's available. Next, project your costs and profits for the next several months, at least.
When you see how large--or small--your expansion pot is, it's time to consider borrowing alternatives. Banks are still somewhat stingy with loans, but if you have strong enough credit and are willing to borrow talk to your bank about loans or lines of credit. Estimate the payback costs and decide if the expected profits from the expansion will make it worthwhile.
Getting the Biggest Bang for Your Buck
Once you know how much you can afford to spend, it's time to determine how to get the biggest bang for your buck.
"Part [of the decision] is cost and part will be 'what will give me the biggest return on my investment'," Clinton says. Ask yourself "how fast will my investment be returned to me in the form of new business?"
Perhaps a you need new employee or product line? Maybe there's some new technology can take your business to another level. The expansion possibilities will vary in scope depending on your business, but here's some choices you may consider:
- Increase staffing: If you have more work than you can handle, another employee may be the answer. If your business involves sales, a new star sales rep will drum up new clients and be a worthwhile investment. Another strategy would be to hire support staff who could take the pressure off you.
"Offload tasks that could be delegated so you can use your skills," Clinton says. "Rather than type invoices, hire someone to do that." If you can't afford a full-time position, consider temps--who can step in when you need them.
- A new location: If you operate a store and you want to expand, it's all about the classic, "location, location, location," says Martin Lehman, a counselor for SCORE, a nonprofit organization providing advice and help to entrepreneurs and small businesspeople. Lehman, who used to own a chain of women's apparel stores, said he opened his stores one at a time, and that it's the best way to expand: slowly. Don't rush and settle for a lesser location. Take your time and find the best place to reach potential customers.
- New product lines: Think about what your current customers get from you today, and how you can complement that relationship. "Look at what you're selling--every business is selling something," Lehman says, "and ask, 'Will it meld into what I'm doing today? Will I still have a customer for it?'" If you're not sure, ask your customers what additional goods or services they want. Create a one-stop-shop for your customers by expanding into the areas your built-in base needs.
- Technology: If you've been itching to get your business an online presence, technology--such an e-commerce site--could change the face of your business. Clinton says the marketing opportunities you could get through the internet are tremendous and always changing, so hiring a technology consultant can help keep your company on the cutting edge.
- Traditional advertising: Reaching out to potential new customers is always a good way to grow your business. Talk to an advertising firm or public relations expert about how and where you can get the word out about your business.
Run Several Scenarios
When you choose the area of your business you'd like to expand, it's time to examine the "what ifs." Examine each growth possibility and run the numbers differently to see how each option could impact your bottom line. Don't jump at the first idea without considering all the possibilities, Lehman says.
"If I wanted to get married, I'm not going to marry the first girl I see," he says. "Take each avenue and examine it carefully. Each has it good points and bad points. See which will bring the most profitability."
Karin Price Mueller is an award-winning personal finance and consumer writer, based in New Jersey. Read more of her work at www.KarinPriceMueller.com .