A period of general economic growth would seem to be a good time for a business to expand. However, individual companies and private enterprises may find the opportunity to expand at almost any time. The factors that affect any decision to expand are varied and include several factors that are very specific to the company in question.
Things to consider when expanding a business
A number of key issues are likely to be at the top of the list when a business owner is considering expansion. They do not cover everything, but if they are positive, then planning can proceed to a greater level of detail.
Finance – working capital and revenue patterns should be examined as part of the decision on whether or not to expand. One financial indicator is whether income levels are in line with the figures projected in the company’s business plan. If sufficient capital is in place or can be obtained to fund the expansion and if the financial indicators show a growing market, then the signs are potentially favourable.
Employees – part of the calculation should take into account whether expansion can be implemented with existing employees, or if extra personnel will be needed. Extra employees bring an additional financial burden, and this should be taken into consideration in cost calculations. The potential positive and negative effect of new individuals on workload, organisational atmosphere, and innovation, for example, should also be considered, particularly in a small business setting. Outsourcing tasks is another option to consider.
Competition – as when setting up a business, the current competition should be researched before any expansion is considered. If there are signs that there is an unmet demand in the market it could be a signal to go for growth. Similarly, if competitors are starting to open new lines of business, this may indicate that there is market potential.
Outsourcing specific tasks
Given the variety of tasks involved, even can benefit from outsourcing certain functions. Most commonly, outsourced tasks tend to involve logistics or routine administration, such as those involving financial management. Suppliers of such services, such as umbrella companies, specialise in taking over sufficient of the more time-consuming business tasks to free managerial time. This frees up more staff to focus on developing business strategy and customer relations.
The importance of expanding at the right time
Timing is a crucial factor when deciding to expand, regardless of the size of the business. Significant factors in deciding when to expand include the current financial health and projected growth of the company, plus the projected growth in demand of a particular sector. A significant downturn in consumer confidence may signal that expansion plans would be better delayed. On the other hand, controlled and well-managed growth that takes place in a timely manner to capture a growing market is likely to be more effective than expansion that is hurriedly undertaken to catch up on a market trend that has already developed and which is already becoming saturated.