4 Business Decisions You’ll Need to Make as Your Company Expands
Success inevitably leads to growth. So, when your business requires new facilities, you have a tangible sign that you’re doing something right. Still, you feel pressured to expand so that your business can continue to grow. However, haste can cause you to forget important considerations and end up costing you more than you expect. Prepare yourself for a smooth expansion by considering the following business decisions as you plan.
Check Your Competitors
If you see your competitors expanding, a surge in your industry and market may account for your current growth. In such a case, an economic bubble may soon burst, eliminating the need for extra space. However, if you delay your expansion, your competitors’ expansion may place them at a competitive disadvantage. Also, the reverse is true.
If you expand your business, but your competitors don’t, you may lose the ability to maintain competitive prices.
If you expand your business, your fixed costs will increase. You might also need to expand your payroll to support your additional capacity. So, you should decide whether your sales will increase quickly enough to pay for those costs and still create a profit. In other words, your expansion may negatively impact profitability, even if your sales numbers continue to grow.
So, before making any commitments, perform a thorough analysis of your current and projected sales figures and the cost of your expansion.
Count All Costs
As you plan your business’ expansion, you might become preoccupied with the cost of your new or expanded facility. In addition to space, you will also need to acquire new equipment. Furthermore, if you’re moving your company to a new location, you’ll need to budget money for packaging supplies and other incidental costs.
Planning may help you uncover other hidden costs. For instance, your utility, cleaning, and maintenance costs will most likely increase. So, leave plenty of space in your budget to cover such unanticipated expenses.
If your business lacks enough cash on hand to fund its expansion, you will have to borrow money. So, the cost of capital can add even more to the cost of your expansion plans. Similarly, you can expect to face additional cash flow challenges. In other words, you might need to borrow additional money to sustain your existing operation.
You naturally feel excited when your business grows. By preparing to make the above decisions, you can set the stage for a well-planned, orderly experience that will lead to your continued success.