It’s been a while since you set out on the entrepreneurial path. Slowly and steadily you’ve accumulated a sizeable client base and have a significant presence in the market. If you’re confident in your product or service and are looking for new opportunities, or your customers are asking you to add more locations, then you should consider expanding your business. However, just as you did when setting up your business, expansion also requires careful planning. Here are a few things to think about before taking the plunge.
- Know the geography well
The choice of location makes a difference. Pick it carefully. Scout around for competition. Is the location of your site central enough for potential customers?Make sure you check out the availability of necessities like a good road, electricity, water and labour that you will need to set up the business.
- Analyse capabilities
Are you geared for expansion? Make sure you have a talent pool that can support you. Expansion, however planned, will mean more work to start with. Let your team know that so they can be prepared and willing. Take a look at your equipment and calculate whether your capabilities are sufficient for the additional load or will you need to first take a business loan to get more or new machinery.
Will your suppliers be able to keep pace? What about logistics? Decide whether you will set up a new operations centre or manage everything from your current location.
- Market research and target audience
Start by first determining if your service is needed. Do you see a gap in the market that your product or service can fulfil? Can your customers give references that you can start with?
Do you see a lot of competition from the start? Unless your product can offer a cost advantage or fulfil a need that competition cannot, think carefully before venturing into this market. You might succeed, or you might not. Is it worth the effort, when you could be more successful elsewhere, with the same time and money?
Your previous successes have given you an idea of who buys your product or service. Do you have a similar target audience in the new location? You might need to take a business loan to run an effective marketing campaign to get their attention and grab their interest.
- Business funding – Loan or equity?
Any expansion plan needs business funding. There are two types if ways to finance your business – loan or equity. You can take a loan from a lender or a bank, and pay off regular instalments. The obligation is over as soon as you make the last payment back. You might (or might not) need to offer collateral against the loan; it depends entirely on the type of loan you take.
In the case of equity, you ask people to invest in the business on the promise that they will get a certain percentage of the profits when the right time comes. Interest rates might be lower, but with equity the person making the investment has a stake in the business, and naturally a say in everything you do. This takes the joy of being an entrepreneur away a bit, don’t you think?
- SWOT Analysis
Your expansion plan must include a SWOT analysis – Strength, Weakness, Opportunities and Threats. Take outside help, if need be and be honest with yourself.