This article is all about business expansion 101: how to grow your business. Expanding a business has different meanings for everyone. For some, it means moving to larger offices, while it can mean acquiring a competitor’s company for others.
Read our guide to business expansion 101: how to grow your business. Discover essential tools for business growth & expansion strategies.
There are several reasons to expand your business. This includes increasing your market share and competitive advantage. However, you should also consider your business’s readiness to expand. Evaluate your customer base, cash flow, and product offerings.
You can then incorporate internal growth strategies like creating a new product or launching an e-commerce website. Alternatively, acquire or merge with an existing firm.
While it’s easy to find strategies to grow your business, it’s not as simple to know when to expand. That’s why we’ll walk you through why and when you should expand operations. We’ll also provide different ways to grow your business. Let’s dive right into business expansion 101: how to grow your business.
It may be obvious to most business owners that expansion allows you to make more money. However, increasing profits isn’t the only reason to expand your business. You can reap several other rewards when you increase the scale of operations.
One such reward is an increase in your business’s market share. This entails dominating more of the market compared to your competitors. Customers will lean towards your products more and thus initiate an increase in revenue.
With an increased market share comes an increase in your business’s competitive advantage. Unfortunately, businesses don’t operate in solitude. There are dozens of competitors in the market. And in some industries, there can be thousands of companies to compete with. That’s why it’s vital to have an advantage over your competitors.
Your business’s bargaining power with suppliers and customers increases when you expand. You can also become a leader in the market, allowing you to influence prices. Another reason to expand your business is to increase economies of scale. This enables savings on production costs when you increase output.
Since every business differs, you may wonder when your company is ready for expansion. The next section of our guide to business expansion 101: how to grow your business covers expansion indicators.
Before employing strategies for business expansion 101: how to grow your business, determine your business’s readiness for growth. If you expand before your business is ready, there may be negative consequences. Therefore, consider the following factors to decide if it’s time to grow.
How your industry or market is growing can tell you whether it’s time to expand. If there’s growth, there’s a demand for businesses selling your products or services. However, if there’s no growth, it may be time to pivot into another market.
According to Statistics Canada, there’s been steady growth in the service-producing sector compared to the goods-producing sector. On average, every year between 2014 and 2018, over 74,000 businesses were created. This is in part because of lower barriers to entry.
Customers are the lifeblood of any business, so they’re an essential aspect to assess. A steady customer base with new and repeat buyers shows high demand for your products or services. With an increase in business, it may be an excellent time to grow.
You mustn’t confuse a sudden spike in sales for high demand. Therefore, ensure consumer demand is consistent and not seasonal. While assessing your customers, it’s also vital to read reviews and listen to suggestions.
If there are customers who want to use your products but your store is too far, note that. You can open a new store to tap into a market with a demand for your products. Also, if the delivery time is getting your customers down, find ways to improve it. Or maybe your customers would like a different service from you.
Make sure you survey your customers before making any big moves since they should come first in your business. If people aren’t buying your products or services, you may have to take a step back. Figure out how to increase the demand for your products or services and how to retain customers.
Before you expand your business, you must be financially prepared. Therefore, assess your business’s cash flow to determine if it’s sufficient to fund business expansion. You should look for a steady cash flow from a consistent stream of new customers.
In addition, assess your business’s profitability. If you’ve had steady profits for over three years, it’s an excellent indicator that you may be ready to expand. Bear in mind that if you can’t finance expansion on your own, consider external financing. It may be the right thing for your business instead.
Is there a new product or service offering that you can add to your current business offering? If yes, it’ll be an excellent way to expand your company. For instance, if you sell necklaces, you could add other accessories like rings to your product line.
Another option may be to include necklace repairs as an additional service. Or, you could allow for custom designs as part of an exclusive service offering.
Now, let’s get down to strategies for business expansion 101: how to grow your business. There are two categories of business expansion: internal and external growth. With internal growth, you’ll use in-house resources and expertise to grow your business. As for external growth, you’ll use internal and outside resources and skills.
Every company uses different growth strategies. Perhaps internal growth strategies are better for your small or medium-sized business because you have more limited resources.
External growth strategies may be ideal for larger firms with the resources and capabilities to acquire another business. Assess the following internal and external growth strategies to see which will work for your business.
You can use these internal growth strategies to expand your business:
Alternatively, you can use these external growth strategies to expand your business:
Knowing how to grow your business is one thing, but finding financing for expansion is another. The last thing you want is to expand and deplete your business’s cash flow. That’s why it’s crucial to determine where you will get the money to fund expansion before making any big moves.
Business earnings might be an evident source of funds for your company’s expansion. However, you’ll most likely use the capital sources that financed opening your business.
This may be personal finances, a bank loan, or funding from another financial institution. Canadian small businesses can capitalize on the Canada Small Business Financing Program to get funding easily.
Alternatively, you can borrow money from friends or family. However, this may create an uncomfortable situation in the future. Instead of relatives and friends, you can crowdfund your business’s expansion or look to venture capitalists.
We hope our guide to business expansion gave you clarity about growing your operations. To conclude on business expansion 101: how to grow your business, there are a few things to keep in mind. Assess whether it’s time to expand your business operations by analyzing your customer base, industry growth, and cash flow.
Once you’re sure it’s time to grow, consider if an internal growth strategy will work for your business. Maybe there’s a new product or service you can offer. Or there’s a new location you can expand to. Alternatively, you can consider an external growth strategy such as an acquisition, merger, or strategic alliance.
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