Growing your business has obvious advantages. The opportunity to diversify, combat competition, launch new products and services and provide opportunities for staff advancement is exciting and can help realize your goals and dreams for your business.
Before you make plans for expansion, though, it’s important to answer a few key questions. OPEN Forum community member, marketing consultant and blogger Patrick McFadden with Indispensable Marketing asks: "How critical is it to be prepared before you grow your business? Growing your business takes a lot of work and planning. What do I need to be prepared?"
“The better prepared you are for growth, the better your chances for business expansion success,” says Brian Moran, publisher of At Home with Century 21 Magazine and OPEN Forum contributor. He advises devising an operational plan that helps you get to where you want to go.
“Think of your operational plan as a GPS system,” Moran says. “The more specific your plan (e.g., growth from existing business and new business), the less chance you have to get lost.”
Without a clear plan, expanding your business can be disastrous, adds Reggie Gilyard, Chapman University’s Dean of the George L. Argyros School of Business and Economics, who worked at the Boston Consulting Group for 16 years developing growth strategies for companies.
“Growing your business without the proper preparation impacts customer and/or supplier relationships, staff morale and potentially the viability of the business,” Gilyard says.
Here are Gilyard's three steps to prepare for growth.
1. Set attainable business growth goals.
"Start your expansion plans with a specific, measurable, attainable goal, such as 10 new accounts in 2013 or $1 million in revenue,” Moran suggests in the OPEN Forum community. “Then put together an operational plan. How will you get from where you are now to where you want to go? The key is to refer to your plan on a regular basis and revise it if necessary. Also, have the resources in place to successfully execute your plan.”
2. Plan for sustainable small-business growth.
Perhaps even more important than being attainable is the idea of growth that is sustainable, Gilyard says: “Planning for sustainable growth begins with setting a rational growth target for the business and follows with a rigorous analysis of a set of questions to realize the target." According to Gilyard, no matter what your goal—for instance, to grow the business by 15 percent per year for the next five years—you would ask and answer the following two sets of questions:
- Consider the operations of your company. “Can you operationally sustain this rate of growth with your current infrastructure, suppliers, human capital, management bandwidth and such?” Gilyard asks. “Do you have access to investment capital at a reasonable cost, if needed, for new infrastructure? Do you have access to additional supplier and/or human capital capacity at historical rates, if needed? What are the potential sources for this incremental capacity and what is your plan for securing new suppliers or people?”
- Look closely at your finances. “Is the target growth rate financially sustainable given your current debt/equity structure and profit margin(s)?" Gilyard asks. "If not, do you have access to capital to support the investments required to grow, and should you take on more debt or seek more equity? Or, can you increase your profit margin to make the numbers work?”
3. Revise your business expansion plan as you progress.
Planning for sustainable growth may require some recalculation, Gilyard says. “As you work through answers to the questions, you may find the need to revisit and revise the target growth rate.”
Being prepared before you grow your business helps ensure a smooth expansion and continued success with your business.
Read more articles and see exclusive videos in OPEN Forum’s special section on Managing Your Money.
A freelancer since 1985, Julie Bawden-Davis has written for many publications, including Entrepreneur, Better Homes & Gardens and Family Circle.
Photos: Thinkstock, OPEN Forum Community