The peaks and valleys of the economy — whether global, national or local — can make it difficult for business owners to decide when to really push for growth rather than hold steady. However, for some companies, strategic expansion can be a good way to ensure operational stability as well as take advantage of market opportunities.
The inevitable question is: How can you expand safely without catastrophically straining cash flow or getting into insurmountable debt?
Getting from here (current status) to there (strategic objective) calls for a carefully plotted, methodical plan. Here are some steps that typically best serve expanding businesses:
1. Identify your growth objective and goals. Growing a company is like a well-planned vacation: You've got to know where you want to go and what it will take to get there. Is your objective to double in size over the next five years, or to grow at a consistent percentage rate the next 10 years? Think of the objective as a kind of mission statement — "This is what we want to do!" — and the related goals as the tasks or benchmarks you'll need to achieve to get there.
2. Marshall your resources. After you've identified your objective and set the various goals it will take to fulfill it, you'll need to round up your resources. What mix of existing and new customers, product or service lines, supply chains, and distribution channels is most likely to take you to your destination. For example, will your company grow organically or look at acquisitions? Your strategy will guide investments of money and resources such as staff and technology.
3. Fine-tune existing operations. Before your company expands, verify analytically that it's currently operating with consistent stability and profitability. That way, you and your leadership team can focus on growth without overlooking impending dangers or an ongoing crisis that you just don't know about.
4. Implement solid processes and controls. Start-up ventures may be able to get away with a freewheeling lack of organization. Established businesses pursuing growth typically need strong structure in terms of management and processes. Financial controls also become increasingly significant as a company expands, and the owner(s) and leadership team can no longer personally handle all transactions.
5. Stay current with the latest technology. A growing organization will more than likely need upgraded technology to accommodate a greater volume of business, so transactions can proceed smoothly and efficiently. Regularly review, maintain and update your tech to minimize the chances that problems will interrupt progress.
One of the most important resources mentioned above is indeed your supply chain. Having a good one means that products or services can be delivered to the right place, at the right time and at the right price. Failing to meet customers' needs will greatly impede any effort to expand the business.
To minimize this risk, check that your company's suppliers can provide materials in the quantities you'll need when you're ready to markedly grow. If current suppliers are unable to do so, identify other vendors to fill in the gaps. Ideally, you want to provide each supplier with enough business to negotiate volume pricing without becoming too dependent on any one vendor.
You'll also want to ensure that your company is adequately staffed to support an expansion. Just as a business needs technology and suppliers that can support growth, it requires employees who are skilled, trained and motivated to accomplish the stated goals. Growth demands hard work, so employees must have passion and dedication. Determining when to add staff is a balancing act: Your business needs enough of the right people in place to fulfill its strategic objective, but you don't want to incur unnecessary labor costs by hiring willy-nilly.
Of course, delegating responsibilities is inevitable as your company grows. In addition, you'll need to continue to communicate with your customer base as you expand the business. Doing so will enhance the focus on customer service, which is among the most important elements in an organization's sustained success and growth.
Finally, don't overlook cybersecurity. Failing to protect against external cyberthreats (such as hackers and ransomware), employee fraud and other risks can devastate a company and bring a growth plan to a screeching halt. Both solid internal controls and the latest technical tools are critical in these efforts.
Growth is a survival strategy for many businesses, but it also brings risks. To catch growth opportunities, stay alert to ongoing changes in your industry and market with an eye toward elevating your company's strengths and eliminating weaknesses. Professional advisors, such as your CPA and attorney, can prove invaluable to deciding when it's the right time to expand.
Get in touch today and find out how we can help you meet your objectives.
