Monday, October 10, 2011

Business expansion

Business expansion




The do’s and don'ts of business expansion

At one time or another, every business goes through a growth spurt and, whether it’s a multi-national corporation or an entrepreneurial enterprise, expansion is a tough process to navigate.

The real danger for any expanding business is that it does so too quickly or in an uncontrolled way. When this happens, cash flow and customer satisfaction are usually the first casualties and, in extreme circumstances, these can result in the demise of a once flourishing business. The trick is therefore to manage the growth process so you reap the benefits in the medium- and long-term.

Plan your expansion

It may seem obvious that any entrepreneur going through an expansion phase should do so with a game-plan, but many businesses expand in reaction to circumstances and don’t draw up a solid plan. Without this roadmap, it’s easy to get lost along the way, making changes to your business that are either too costly or not well thought out.

Don’t over-expand

While planned expansion can take a business to a whole new level, over-expansion is one of the biggest dangers of a growth phase. It’s easy to get carried away in the heat of the moment and to expand beyond the needs and the financial capacity of the business.

As a rule of thumb, plan capacity based on a five-year projection of demand and allow an additional 10% of capacity over and above that for periods of heavy demand or for partial down-time in any part of your business. More than this could be very risky and leave a business with overheads it can’t cope with.



Get professional financial advice

Whatever the nature of your expansion, there are financial implications for the business and it’s always best to seek professional advice. If you need to build or purchase your own premises, for instance, it’s important to speak to a financial institution that has experience in this area.

For plant and equipment, you may need to consider a flexible financing option, either a loan or a combination of a loan and an equity investment. Again, an institution with experience in the field and in your own industry is essential.

Develop a Project Management Schedule for the expansion

Again, this may sound self-evident, but many businesses expand without treating the expansion like a project – one of the most significant it will ever undertake.

When drawing up a project management schedule:

  • Identify key deliverables
  • Attach dates to these deliverables
  • Identify key responsibilities
  • Set up a regular review schedule
  • Identify procedures for managing non-delivery on any part of the project
  • Build in appropriate timing and financial contingencies

Managing the process is as important as planning it and it’s important to commit to this in a formal way, building in the appropriate checks and balances.

Keep your customers informed

Expansion of any kind can cause disruptions in your day-to-day operations and it’s important that your customers know what to expect. Before commencing an expansion, tell them what you’re planning and what the expected completion date is. If possible, tell them what disruptions to expect and how you’re intending to deal with them.

Announce the completion of your expansion

Once the expansion phase is complete, it’s important to let both existing and potential customers know about it. Tell them about the increased capacity of the business and the additional products and services you can offer. Develop a special marketing drive to announce the occasion and send out media releases, especially to the local and regional press.

Celebrate this moment in your business – it’s one of the best marketing opportunities you could ask for.

No comments:

Post a Comment