There reaches a point for most businesses when they think about expanding however whilst enthusiasm is great, it is vital to give any expansion considered thought:
Making an informed decision
Most crucially, only healthy firms should consider expanding. If your business is not profitable, expanding may only hinder you. Assessing your current business performance is key. This will help determine whether you have a solid base that can withstand the inevitable pressure and upheaval that accompanies expansion.
Carrying out thorough research is crucial, especially if you are moving into a new area (whether that be a new location, product or service). You cannot just assume that what has worked before will work again. You need to establish: Is there demand for your product? How big is your potential marketplace? Will you be able to hold your own against your competitors? Etc.
What are the cost implications of expansion?
You may need additional staff and resources. Will the profits generated by the increased business sustain these additional costs?
Raising business finance
If you need finance to expand consider the options available to you:
Bank loans are often the most popular source of funding. These can be taken out for the fixed term, with interest rates agreed in advance making factoring in monthly repayments to your financial plan straight forward. However, every loan application you make shows on your credit file.
Ensure that your business plan is watertight and that your reasons for borrowing the money are valid before you apply for a loan. We can carry out a financial assessment for your business in advance of your loan application – just get in touch for more information.
Alternatively, you may wish to use an overdraft. Overdrafts have a set amount of money, which is agreed between you and your bank and limits are agreed in advance. Interest is typically charged on the money that you receive from the overdraft facility. However, proceed with caution. An overdraft is not designed to be a long-term source of finance and continued use may cause your bank to question your business’ profitability.
Some firms operating in specific sectors and working on distinct projects may be offered a grant. Typically provided by government, local councils and charities and often non-repayable, grants are highly sought-after and competition for them is fierce.
Managing the expansion
Thorough planning is key to the effective management of a business expansion. Our top tips for a smooth expansion include:
Creating a solid marketing plan incorporating your expansion plans.
Expanding steadily, preferably in stages: enabling you to review and revise your plan as you go.
Informing your existing clients about your plans and reassure them. Remember to highlight any changes and improvements you have made to the business.
Setting achievable and realistic goals and deadlines.
We have guided many of our clients through business expansions so please do get in touch if you would like to talk your plans through. We offer a free initial consultation. Call 01252 728598, email email@example.com, visit www.branstonadams.co.uk.
Branston Adams, Accountants and Business Advisors, are based in central Farnham offering specialist Tax Advice, Company Formations and Auditing along with all the normal accountancy services you would expect.