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Updated: March 27th, 2020
As a successful entrepreneur, you know that just wanting to own a business is a far cry from being able to run one effectively. In the words of Uncle Ben, “With great power comes great responsibility.” Taking your business to the next stage in its development is not much different—or much easier—than launching it. Use the following checklist to determine if you’re ready to take that step.
A combo of confidence and care mark the entrepreneur truly prepared to expand their small business. If you’re not sure you’re ready yet, use this list to determine which weaknesses to address first. If you check out against all six items, use it to build the confidence to go forth!
1. You have a strong team
Without a strong management team and passionate, reliable employees, a great concept and high sales don’t necessarily spell success. Expansion puts a lot of stress on your business and will require that you give up more and more direct control. Are you prepared to trust your team with more decisions, and are they ready for what you’re entrusting them with? Will they be by your side in three or five years? Consider who’s moving forward with you and who you can’t move forward without.
2. Your customers love you
Your customers can tell you a lot about whether you’re ready to expand your small business. One way is by literally telling you to expand! If multiple customers are asking you to open a new location or expand your services, you can be sure you have demand and a loyal customer base to rely on. Another way they can indicate you’re ready for expansion is by what they do. Do customers seek you out on their own? Do they come back time and again? These are all strong indications that your business might be ready for growth.
3. You’re bursting at the seams
If demand for your products or services is exceeding your capacity, you may be ready to expand soon. If your shop or office are becoming too cramped to breathe in, you may need to! First make sure that demand is high for many months in a row, not just as a temporary spike. Likewise, have the pieces of the puzzle are in place before you make any decisions based solely on demand.
4. You have the money
That means enough revenue, profits, cash flow, and financing. You’ll need a lot money to carry you through the ramp-up phase of your expansion, which usually means unforeseen costs and investments that won’t see returns for a long time. You need to be profitable for a few years and have sufficient cash flow to carry your business through a successful expansion, whether or not you receive financing.
5. Your plans are proven
If you can attribute your current success in part to setting up goals and achieving them systematically, you may be ready to take on the complex task of expanding. Reaching milestones on time or ahead of schedule is a good indication that your planning skills and business model are strong enough for new challenges. While planning for expansion, you should of course be making sure your industry or market’s growth is favorable, and that you have a detailed marketing and sales plan for the new market you’ll be dealing with.
6. You have systems in place
If you couldn’t (hypothetically) hand over the operations of your small business to someone else, it may not be the right time for expansion. If your sales doubled tomorrow, is your customer service team ready to handle the new demands? Have you thought through where to store extra inventory? If you needed to hire three new people next week, would they have a training manual to guide them? Even with great documented systems in place, you will have to work twice as hard at the beginning of an expansion. Make sure the transition isn’t any rougher for your or your team than it needs to be!
If you’re not confident about expanding your business right now, don’t rush. Make a plan for slow growth and follow through. Build your team, your customer base, your profits, and your systems. When you’re prepared as well as excited for the challenge of expansion, you’ll enjoy the process much more.
Michael Jones is a Senior Editor for Funding Circle, specializing in small business loans. He holds a degree in International Business and Economics from Boston University's Questrom School of Business. Prior to Funding Circle, Michael was the Head of Content for Bond Street, a venture-backed FinTech company specializing in small business loans. He has written extensively about small business loans, entrepreneurship, and marketing.