6th November 2015 by KLokk Accounting.
Now that you have been in business for a while and become moderately successful. The challenges seem to become fewer, your business is running smoother and you are drawing a decent salary. You may be wondering if you should continue plugging along or take your business to the next level for further success. In other words, is it the right time to expand your business and is it worth taking this risk?
The answer will not be the same for everyone depending on a variety of things. MEET FS are some of the key things you need to consider before expansion.
- Market – Will the market I am in continue or will I have to adapt to shifting conditions and change or add new products or service.
- Employees – Will I have to consider adding additional employees and can I afford them.
- Equipment – Will I have to add more equipment and can I afford it.
- Time – Is the economy stable enough so that I can afford the risk.
- Financing – Am I earning enough income to finance an expansion or will I have to borrow money from banks, investors, friends or family.
- Space – If I expand my business, will I be able to stay where I am or will I need new facilities.
Success is feeling good and failure is not an option. Regardless of what your original goals were, it is important to look at the pros and cons of growing your business in a prudent manner to avoid mistakes that may cost you in the long run.
Here are some of the pros and cons to consider:
Pros:
- Business growth creates a strong sense of a successful business in the minds of your employees, customers, suppliers and invеѕtоrs.
- The more products you produce, the cheaper the cost to make them as you can obtain attractive deals from your suppliers.
- Business expansion is an effective way of utilizing your available fundѕ.
- Your business expansion not only increases your wealth but also contributes to the financial strength of the community by creating more jobs for local residents.
- When your brand is recognized nationally and/or internationally, you actually reduce the overall competition as you have established a unique value and position for your own brand.
Cons:
- Expanding into additional locations presents a more complex logistics problem.
- If you have to pay your overseas suppliers and employees in a foreign currency, thеn currency exchange rates is an additional risk to your business.
- Getting the right staff and retaining talented employees from a distance requires high level of management and leadership skills.
- Asset Protection, Limitation of Liability, reporting and compliance are your key concerns. You will need your accountant to guide you through these important things.
- An expansion without grеаt care аnd a gооd deal of rеѕеаrсh could destroy a smoothly running business and leave the owner filing fоr bankruptcy.
So when should you consider taking on this risk?
- Expand when your business has become profitable.
- Expand when you can see potentially more profits by doing so.
- A too early or too quick expansion can pose the risk of unsustainability to your business.
- A too late or too slow expansion will see your competitors taking business from you.
- Do not consider expansion if your business is unprofitable as it will lead to a deeper hole rather than a solution to an existing problem.
Conclusion
Like with anything worthwhile in life, there are risks in expanding a business. Growth is necessary for any business in order to achieve the desired financial wealth but it’s important to grow with as minimum risk as possible to an already successful business.
