Can I Expand My Business In These Hard Times?
Consider Expanding Your Business in a Downturn
Maintaining profitability in the current economic climate is difficult for many businesses. While business owners everywhere are cutting costs to remain in business, it might actually be time to consider expanding yours.
One way business often expand is by focusing on their existing customers base. Adapt to the customers' evolving needs and problems by building on product lines and enhancing customer service. A larger variety or more targeted products and additional support can do wonders.
Another expansion strategy is to gain new customers. Open a new location, enter a related industry, or acquire of a competitor. These moves strategically set your business up for further growth and enhance your company's value for potential exit.
Expansion risk benefit analysis
Like every business decision, you should weigh the risks and benefits. Consider expansion effects on cost. Can you gain the advantages of economies of scale? Consider current and potential customers. Will expansion grow your customer base? How will current customers deal with the changes? Lastly, consider yourself. With all of the potential problems that may arise, can you handle the stress?
Most banks are very hesitant to make any business loans. Even successful business have trouble, so don't count on a new loan to pay for expansion.
If you are able to secure a bank loan, you'll likely have to put up significant collateral, either in the business or your personal assets, like your home.
It's even difficult to find funding for acquisitions. Seller financing has become more common.
Weigh your funding options carefully before you jump right in.
On your mark, get set…
Develop a detailed plan of how you will proceed expanding your business. For internal growth, map out how to allocate resources, changes you'll make and the steps to take to reach your goal.
If you're going the acquisition route, decide whether you will use outside help in the process. Brokers and intermediaries have expertise in identifying and screening businesses, as well as the with offer, negotiation and closing processes. Online marketplaces are a great resource for taking on acquisition yourself.
Taking the time to consider your options and plan your business expansion will put you in a better position to succeed.
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