Starting and running a small business is exciting, especially at a time like now when the market is very supportive of small business growth. You have the opportunity to engage customers directly through e-commerce platforms. You can also turn product ideas into tangible products customers can buy with the help of rapid prototyping and outsourcing.
Despite all of the excitement, managing a small business is still challenging. One of the most difficult decisions to make is the decision to invest more and to expand the business. When is the right time to expand your business? Here are the signs to look for.
Base Demand
The first sign to look for when you’re trying to decide whether to expand the business is a steady and sustainable base demand. A base demand usually means you have loyal customers or you have customers that continue to buy your products (or use your services) on a regular basis. That base demand is the foundation of your business.
Having a base demand means the business has a healthy cash flow. You can easily forecast revenue and expenses. You have a solid ground on which future plans can be laid out. Like a steady foundation of a house, the base demand is a foundation and signal that it’s okay for you to grow further since you’ll have a steady financing to facilitate the growth. Besides, it’s always good to watch out for this signs because your business has to grow when the time is right. Failure to anticipate when you should advance your business could mean the ultimate failure of your business.
Untapped Demand
Another sign that it is time to develop your business is untapped demand. If you run out of inventory before meeting the demands of your customers, you have the perfect opportunity to grow your business and take it to the next level.
You know the demand is there and the decision to develop the business should be easy to make. I’m not talking about sudden spikes; I’m talking about sustainable demand and the steady growth of it. This is essentially determining how much potential your business has. Untapped demand is realizing that your business has some potential energy that can be tapped and converted to more revenue. This could ultimately have the ripple effect and even present more chances of growth that you may not have anticipated. Growth means change, and change will invariably introduce new variables that you may never have considered. They may be good or bad, but in this instance, chances are that they will be good. It’s a business, and risk is always involved. You knew this from the beginning. But this is a calculated risk, and those are the risks you really want to take.
Cost-Saving Opportunities
Boosting the production capacity of your business often leads to opportunities to save a lot of money. Let’s say you produce wooden educational toys and the majority of your manufacturing process is done manually. According toTimesavers Inc, investing in machinery not only will increase your production capacity but also help you save on production costs!
Instead of spending hours sanding everything to a smooth finish, your workers can complete the same task in minutes with a belt sander. Automated cutting tools will reduce the number of errors. All of these changes lead to a more efficient production line with low waste and high effectiveness. The more time, energy, and money you save, the more extra resources you’ll have at your disposal for growth and development. You can utilize the extra time to plan ahead and determine how things are likely to turn out for your business a few years down the line and prepare in advance to deal with them. Remember to consider the current growth of your company. The extra money available can be used to invest in more tools that encourage and facilitate efficiency and higher productivity.
Industry Trends
The last sign to spot is the steady growth of the entire industry. In certain sectors, collective growth strengthens the ability of businesses in the sectors to grow as well. Before the fintech boom earlier this year, for instance, the entire financial industry showed signs of steady growth and a measurable recovery. Steady growth is the ultimate sign that things are working as they should and that the chances of encountering significant challenges are low. It is also a good sign that something big is likely to happen in the near future, and only those who are prepared for it will rip its benefits. For example, when an industry shows steady growth, it means that it’s likely to experience a period of high cash flow. Therefore, if you expand your business before this period has peaked, chances are that by the time it will have peaked, your business will be among those that are ready to handle the high flow of cash that the industry will be dealing with.
Making the decision to expand your business will still be tricky, but the four signs we discussed in this article provide the necessary cue to start thinking about expanding. At the very least, you know you have the support of the market, which means you can grow in a more manageable way while mitigating the risks and maintaining the smooth operation of the business. When in doubt, take things slow. No one will punish you for tasting the water before deciding to dive in. Better safe than sorry. But also remember, the only worse thing than failure is never starting. So if you never take a chance at growth, you’ll never know what might have been. As long as you pay attention to the four signs above, and you do your math well, your chances of success are high.
