Here's How You Can Know if Your Business is Ready for Expansion

With a half-hearted strategy and poor execution, an expansion can fail and can also risk the current business plan

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Running a business isn’t easy but the joys of seeing it grow are also incomparable. For the founder of a business, after establishing the base of the business in the city they started in with a good number of customers and revenue pouring in, it’s time to think of expansion.

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But the expansion of a business comes with its own risks and needs the right strategy. With a half-hearted strategy and poor execution, an expansion can fail and can also risk the current business plan.

Entrepreneur India spoke to founders about how to go about a business expansion and what one needs to keep in mind before expanding to a different location.

How To Know if You Are Ready?

When you start thinking of expansion, it’s important to sit down and analyze where your business is at currently. You have to study your business in its current form and understand if it’s even ready for expansion. Prateek N Kumar, CEO & MD, NeoNiche Integrated Solutions Pvt. Ltd, said that there are certain signs which tell you that your business is ready for expansion and the next phase of growth. Kumar said that in a service organization it is when you cross the threshold of 50-100 people in the organization and have the capacity to grow further at 100% to the growth of the industry. Generally, by the rule of thumb, you are ready for expansion. “However, a lot depends on the founder's vision, the business model & appetite of the core team, and the opportunities that the market scenario presents,” he said.

Meanwhile Surya Phadke, Managing Director at Quale Magni said that it’s important to look at key markers in specific business verticals. He added that in particular, look at business segments that make the deployment of capital and resources attractive to investors and whether our distribution depth can help in efficient resource allocation to expand in a sustainable manner keeping in mind our long-term operating profit and revenue objectives. “This quantitative approach helps us in identifying when organic growth is stagnating and makes our approach to expansion more pro-active than reactive,” he said.

Only if you meet all the points in the checklist, you should look at expanding your business.

What to Do Next?

Once you know you are ready, you have to first chalk down your expansion plan. You have to analyze which city you are expanding into and why, followed with a market analysis that explains the need of your product or service in that city.

Kumar said that any business expansion needs to have a good talent pipeline, a robust performance management, and a short-term vision backed by organization’s goals & objectives. “Once a business, is clear about these things there are other variables that play an important part including competition landscape, the geographic market that the organisation wishes to serve as each market differs in its behaviour with another,” he said.

He added that the demographics of the target audience plays an important role in the outcome. Understanding your target audience’s presence in the city you are expanding to – the need of your product there as well as their spending capacity for your product needs to be understood.

Sanchita Dash

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Entrepreneur Staff

In the business of news for 5 years now. Making my way across India thanks to my career. A media graduate from Symbiosis, Pune, I have earlier worked with Deccan Chronicle (South India's leading English daily), T-Hub (India's largest incubator) and Anthill Ventures (a speed-scaling platform). 

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