When it’s time to expand your business, it’s not always clear what’s involved from a financial standpoint. From opening a new location, to hiring new employees, to buying new equipment and securing a business loan, here’s what you need to know.
Budget For The Expansion
Before you do anything, budget for your business expansion. Maybe you have enough money stashed away in the corporate bank account to fund a massive expansion project, but you should still budget that expansion because cost overruns could bring your business to a screeching halt.
If you’re not sure whether you have enough money for expansion, a budget is a must.
Getting financing for expansion is almost a necessity for most businesses. Unless you’ve faithfully been socking money away for years, it’s unlikely that you have enough money to fund the building of a new office.
These business loans for bad credit can help, and you can also try tapping into your unpaid accounts receivable through factoring.
Convincing a traditional lender to do business with you can be difficult. Most banks don’t like funding start-up companies, business expansion projects (unless you’re well-capitalized), and new business ventures. As the old saying goes, “when you need money, they won’ lend it to you. When you don’t need it, they want to give everything to you.”
Scout Your Customers – Do Market Research
Do you have potential in a new location? This is what market research will tell you. What’s the competition look like outside of your home turf? You might dominate in your current market, but if you’re opening up in a more crowded area, you might be surprised by how hard it is to attract customers.
Do you remember how difficult it was to open your first location? Well, by opening up a new location, you’ll be doing that all over again. Make sure the time and money is worth it.
One way to scout your market is by simply driving through neighborhoods and seeing what the competition looks like. How many similar businesses are there within a 3 to 5 mile radius? Are there any building codes that would make it more expensive to build in that area?
If you rent, what restrictions, if any, are there on using the building or office space?
Depending on the business you run, you may need more in-depth analysis like customer behavior metrics.
The SRDS can provide you with such statistics, like average household income, size, amount spent on various products and services, and other key demographic information. Likewise, credit bureaus, like Experian, Equifax, and TransUnion sell similar data, including customers’ credit scores and credit information so that you can get a better idea of the potential for business (if you sell a product that’s typically financed).
Set Up Your Wireframe
Set up a rough outline or plan for how the expansion will go. You could even set up test locations, temporary business offices in various locations to test the sales and marketing outcomes.
If your tests prove positive, you can put more money into the area and really beef up your sales.
Nathan Thompson is a business finance consultant. He enjoys writing about his experiences in the business world. His articles can be found mainly on finance and business sites.
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