5 Best Tips To Knowing When It's Time To Grow Your Business

How exciting is it when your company gets to a level where it’s ready to scale to the next level? Like all successful businesses, growth means success, more customers, and excellent opportunities. While entrepreneurs may have different motivation to growing their businesses, there are several points to consider before scaling.

So, what should you consider before expanding your business operations? If your business is at a point where it’s trying to find more formulas to expand the customer base and boost brand awareness while increasing profits, then you’re ready for growth. If your financial muscle is strong and steady, you can maintain quality levels, or the demand is constantly rising, it may also indicate that the timing is good.

However, managing an expansion isn’t without risks, especially if you fail to identify the right time to scale. For example, a quick or fast expansion can result in quality hitches, cash flow difficulties, or even business disruption. Similarly, when you procrastinate on scaling your business, stagnation might put you at a disadvantage with your competitors.

?On the other hand, careful planning and consideration and sound business analysis will allow you to maximize your chances of succeeding in your development. It will also help you take advantage of opportunities.

The only caveat is that, if not managed carefully, growth can affect your business negatively, especially if the company is struggling. That’s why you need to know the five best tips for knowing when your business is ready to scale. Here are some of the tips.

1. You Have A Loyal Customer Base

Repeat customers are a great sign that you’re good at what you do and that your delivery is consistent. They are your company’s most valuable ambassadors, and keeping them coming back for more is critical to your business's success.

?Happy customers loyal to your brand help make your business stay stable, as they’re not shy about sharing their positive feedback with others. In fact, according to the Pareto principle, repeat customers generate revenue that’s about 16 times more sustainable than one-off customers.

Once your business is able to crack through the shells of loyalty, familiarity, and fondness for your brand, then that’s how you know you’re qualified for an expansion. Customer loyalty increases your company’s revenue and ROI and allows you to reach previously unidentified sales opportunities.

While this may be your cue to jump onto growing your establishment, your recent business success isn’t the only thing you should focus on. A sudden customer spike can be a breakthrough moment for your business but may also be due to market shifts or business seasonality.

?In that case, take a step back to see if the sudden demand is consistent or temporary.

2. You’re Making Consistent Profits

A strong cash flow and excellent financial reports are invaluable assets to a business. This is because profitability impacts whether your establishment can plan for change and growth.??

For your company to remain in business and scale, you need to focus on long-term success to avoid any setbacks related to short-term profits due to economic factors. Growing a business requires investing some of your earnings into your company with potential growth in mind.

Put simply, if your enterprise is consistently making profits, reinvesting them can further improve profitability, upgrade the quality of the product or service, and improve balance sheet strength. Doing so will allow your business to generate higher returns enabling you to develop or expand your existing premises.

Ensure you also have a well-defined business model and its performance records to sustain healthy growth in the future. Create a forecast for a specified period (i.e., month, quarter, or year) for a more reliable representation of your company’s potential.?

Evaluate your current cash flows and projected revenues to see if your company can beat the growth expectations and sustain its projected growth. Robust and consistent revenue growth is not only an indication that your business is thriving, but it’s also a sign that it may be a reasonable time to invest in your company’s growth.

3. Your Industry Is Fast-Growing

If your business has managed to win market share away from competitors, this may be a sign that it may be time to focus on business expansions. As an entrepreneur, you need to be keen on the current market trends to understand what is currently likable to your prospects.

You can start by comparing industry data over a certain period. Pay attention to the periodic trends or results to help assess market attractiveness and set up a winning business strategy.

However, some business sectors evolve at breakneck speed as they have the most brutal and demanding markets. For example, sports, technology, or healthcare markets are subject to rapid changes. Such industries require you to plan and implement an expansion strategy to stay competitive with others.

In such a case, it can also help to read up on industry reports accessible to you to allow you to keep track of industry developments. That way, your business will stay ahead of the curve and not be outpaced in growth by its peers.?

Similarly, if your industry is at a standstill, your business may not be ready for expansion yet, as it may be financially irresponsible to allocate more capital into growth. As a business owner, knowing how to approach your marketing strategy with the future in mind is a smart move, especially when looking to scale up.

4. You’re getting too comfortable

As Pat Riley, former NBA coach and player, once said, ‘complacency is the last hurdle standing between any team and its potential greatness.’ Complacency can lead to critical errors in a business, as it’s the surest way to set yourself up to be blindsided.

For example, an industry change might occur, making your product or service obsolete. Once complacency creeps in a business, it might be hard to change course. That is why you should consider broadening your horizon if you’re getting too comfortable or losing passion for the work.

You can start by:

• Being clear on your long-term and short-term goals required to make the expansion vision a reality
• Setting growth targets while encouraging and rewarding innovation to the hardworking employees
• Investing time and money to sharpen your workforce skills and knowledge
• Covering all the loopholes together with your team while holding each other accountable
• Avoiding taking shortcuts and doing the right thing the right way

Challenging yourself as a business owner to come out of your comfort zone allows you to be on the lookout when industry change is about to happen. It also ensures your business can keep evolving while maintaining its competitive edge and customer base.

5. If there’s an increase in demand?

Demand and supply must be steady for your business to survive an expansion and optimize its capacity. If your product or service is constantly experiencing greater demand, this might be the opportunity to grow your business.

However, before you consider expanding your business, you need to asses your current capacity and demand. Analyze your supply chain, production or delivery methods, business trends, and revenue data. Additionally, if you’ve started turning down customers due to lack of inventory, then it means that you should start planning for an expansion soon.

While this may seem like a nice problem to have for your business, scaling too fast without careful planning comes with many risks. For example, prioritizing growth over employee satisfaction may put additional pressure on the employees, causing burnout.?

This will not only impact the quality of your product, but it will also affect your customer base and low-quality output. While you may be confident that your establishment is ready to scale, setting reasonable expectations and employing more staff to cater to increased demand is crucial for your growth.

You should also consider opening a new location to help you nurture the growing customer base, set new goals, and plan for your growth strategy.

Conclusion

Business expansion is an exciting phase as it means more sales, new customers, new opportunities, more staff, and new products. It also means more challenges and multiple responsibilities for you. However, paying attention to these trends will allow you to assess market attractiveness and create winning strategies. This will help your business to meet future demands comfortably while creating long-term sustainability for your growth.

FREQUENTLY ASKED QUESTIONS (FAQs)

Q: What are the advantages of expanding a business?

A: Generally, the benefits of scaling a business include lowering external risks posed by competition, market disruptions, or technology changes. Other advantages include; creating the impression of greater viability (larger companies are more appealing to angel investors and lenders), attracting new customers, creating economies of scale, increasing your market influence, and diversification.

Q: What should you consider before expanding your business?

A: Before you decide to re-invest in business expansion, ask yourself if you’ve got a steady cash flow to support growth, if your industry is growing, if your customers want more, if you have a loyal fanbase of existing customers, or if you’ve become complacent. Lastly, you need to ask yourself if you’ll be able to maintain the high-quality standards of your products or services once you scale up.

Q: What are the four types of business growth?

A: The four main growth strategies include: Market penetration, whose aim is to increase sales of existing products or services on existing markets, increasing your market share. Market development simply means increasing sales of an existing product or service on previously untapped markets.

Product development aims to introduce new products or services to existing markets—lastly, diversification involves launching entirely new products or services on a completely unknown market.

Q: How will my business benefit after expansion?

A: Expanding a business comes with many perks, with the most significant advantage being that you get the opportunity to attract new customers in new markets or offer a diverse range of products or services.

Other benefits include boosting your business’s brand identity, providing your company with more financial leverage, acquiring more sales personnel, creating economies of scale, providing top-tier service to existing customers, and increasing your market influence.