Even thinking about growing your business is exciting. Expansion means more products or services, customers, sales, and income for you. And, for businesses with physical locations, expansion might mean opening a bigger or second location.
Before you rush into expanding your small business, you need to make sure your company is actually ready for growth. Your recent business success isn’t the only thing you should look at. Here are five ways to tell if you are ready to start business growth.
1. You Have Regular Customers
You must have regular customers. You should have a steady, and hopefully growing, base of customers. Having a regular flow of customers shows there is continued demand for your product or service.
Repeat customers are the best kind of customers. They prove that your offerings are satisfactory. And, the recurring revenue from repeat customers helps make your business more stable.
For example, my company Patriot Software sells payroll and accounting software based on a monthly subscription model. Because there aren’t any contracts, customers can come and go as they please. When I see more and more customers staying month over month, I can be confident in business.
You should be a little leery of sudden spikes in customers. If you see a sudden surge, don’t take that as your cue to expand your business immediately. Your increase in customers might be due to business seasonality or another market fluctuation. Wait a bit to see if your increase in customers is consistent or temporary.
2. Your Customers Want You To Grow
If your customers keep asking you to grow, it might be time to grow.
If customers are asking for more products or services and hours, it might be time to grow to meet customer demands. Hopefully, your growth will satisfy customers, which will increase sales and make up for the money you invest in expansion. For businesses with physical locations, you might want to consider opening a second business location if customers are traveling a great distance to get to you.
Take notes of what your customers ask for, and then look at patterns. When customers call into my business with requests, we make a note in our CRM system. We can see how often customers request certain things. This way, we know exactly where we need to invest.
3. You Have Regular Profits
Look at your business’s net income. Basically, take your business’s gross income and subtract expenditures. This will tell you how much money your business is actually earning after you pay your bills. If you have regular, increasing profits, it might be time to grow your business.
Don’t just focus on short-term success. Your success and earnings might not last. Look for long-term successes and consistently growing profits.
If your business does have regular income, you can invest some of your profits into your business. As you expand your business, hopefully your net income will grow, too.
4. Your Industry Is Growing
If your industry is growing, expanding your business will be easier. Check out your industry trends to find out if your market is on the rise.
If your industry is stagnant or fading, you might not want to expand. You might lose money in the end. Your industry might not be able to support your business if it is bigger or has more locations.
Even if your business is in an industry without growth, you might be able to expand your business by offering new products or services. Think about offerings that can help future-proof your business. These new products or services can help you gain the income and stability to grow further.
5. You Have Too Much Business
You might come to a point where you’re bringing in more business than you can handle. You might need more workers or space.
Expanding your small business can help you manage your demand and even bring on more customers. Hire more workers (or learn how to hire your first employee). Find a larger space for your business, or maybe start a second location to better serve customers in a larger area.
Should I expand my business?
You should only consider expanding your business after you think about these five things. You need to make sure your business is actually ready to grow. If you push your business too soon, you might not have what it takes to survive. But, if your business is ready, you can experience great growth with more income and customers.