As accountants, we understand the drive most business owners have to grow and expand their business. But for many, it’s hard to know where to start and how to reduce the risks that come with business growth.
The simple answer is, successful business expansion requires careful planning so here is our guide to the first 3 steps you need to take to plan your business expansion.
Step 1: Be clear on the reasons you want to expand your business
Building a bigger business creates additional financial risks and operational complexity so don’t consider expanding your business just because you think you should. You need to have sound management reasons behind your decision, such as:
- Investing in more efficient equipment to improve per unit profit margins
- Expanding into new markets, geographic regions or product lines to make your business more resilient to economic uncertainty
- Broadening your organisation’s expertise or customer base by purchasing another business
Step 2: Examine your business’ current financial position
Business expansion requires funding so in this step, you need to assess the current financial health of your business. The financial health of a business includes:
- Your cash reserves and savings
- Your ability to pay your business debts quickly and easily (including BAS, tax and compulsory staff super payments)
- The assets of your business compared with its debts
- Your ability to obtain finance if required (both short and long term)
While you may be able to do this yourself, many established and new clients ask us to assist them with this step.
Step 3: Analyse the market to assess its potential
There’s no point investing in business expansion if there is shrinking demand for your goods or services. That’s why you need to assess your selected market’s potential or consult with a marketing professional who can help you.
In particular, your market analysis should explore:
- The growth trends for your industry and/or product category
- Consumer perceptions and likely demand for your products or services over the time period it will take to recoup your investment
- Likely technological advancements that could affect demand
- The activities of your competitors (including their promotional activities)
- Any upcoming legislative changes that could damage or enhance your business expansion plans
By your side throughout your business journey
Running a small business is both rewarding and challenging. However, with the right advice, you can grow a successful businesses.
At W M Wright & Co, we specialise in helping small and medium-sized business owners through every stage of their business – from start-up to exit. Visit our website for more information or contact us for a chat about your situation. Plus, look out for another article covering the next steps you need to follow to successfully expand your business.
