The decision to expand your business should be based on a number of components, such as financials, logistics and your own emotional readiness. As logic suggests and many have overlooked, only expand your business if you think it will be profitable. If there is an area of town that is not served by competitors or a niche market with unmet needs, then the stage might be set for expansion.
Scale Up and Over the Competition
Achieving economies of scale should be taken into consideration when debating over whether or not you want to expand your business. As your business grows, it should either lower prices and/or increase profits due to declining costs per unit. Typically, once you increase the volume of your purchases necessary for production, the cost per unit decreases. In addition, cost-per-unit should decline as overhead costs are spread out over more and more units. You should expect to increased value for your customer base as marketing increases and they begin to see more product features.
Hands Off Approach
Expanding your business will require you to delegate responsibilities that you have been used to doing on your own. You may have to learn some management skills that you did not need when doing things on a smaller skill with fewer or no employees. Investors might be necessary in order to expand and, to many entrepreneurs’ dismay, investors demand some say in how the business is run.
Learn more about how to grow your small business with the help of the U.S. Small Business Administration. Click here for information on how to forecast your business’ growth, learn better management techniques and stay competitive.