When you started your business, you had to fight to survive. You had to find your customers, figure out how to market to them, check your profit margins, and more. Now that you’re past the growing pains of starting a business, you might be asking yourself, “Is it time to expand?”
However, before you jump into expanding your business, make sure you do your homework. Read on for 8 benchmarks to track to see if it’s time to expand your business.
1. Business is Booming and You’re Seeing Familiar Faces
If you’ve reached the point where you have more business than you can handle, then it may be time for you to expand to meet increased demand. Hiring more employees or looking for a larger space can help you capitalize on the demand you’re already experiencing.
A key indicator that it may be time to grow your business is if you have a high number of loyal, repeat customers. Large sales help you turn a profit, but sales to customers who keep coming back suggest that those profits are sustainable.
2. You Have Regular Profits
If you have strong sales numbers, the next metric to check is your profit margin. If you’re operating at a loss, it may be best to hold off on expanding, and focus instead on reducing your business costs.
If you look at your books and find that you have solid profit margins for your industry, you’ll benefit in two ways. First, it’s going to help you bear the costs of expansion. Second, it’s going to make you more appealing to lenders. So if you need to take out a small business loan to fund expansion, steady profits will help you secure better terms with your lender.
3. You’ve Given It Some Time
Another factor lenders consider for small business loans is the amount of time you’ve been in business. Lenders generally want to see that a business has been open for at least a year. This history tells them that you have a proven track record, which makes you a more appealing borrower.
4. You Have Procedures on Lock
Ideally, when it comes time to expand, you’re able to take your well-honed procedures into your expansion. It’s important to have your accounting processes running smoothly to make sure your books are in order. This will be helpful if you decide to apply for financing to fund your expansion. Additionally, you need to have a clear understanding of your inventory, your operating costs, and your sales now because once you expand, there will be even more to track.
5. Or Maybe You Don’t
Sometimes, the best thing you can do as a small business owner is to know your limits. Is there a specific part of running your business that trips you up? Before expanding, you should identify any current gaps in your business management. Then, look for the right person or software to help you fill that gap before expanding your business.
6. You’ve Outgrown Your Space
Is space getting tight? Whether you’re operating a restaurant, retail space, or factory, having enough space is essential to fulfilling sales. While we use the phrase “working elbow-to-elbow,” literally doing so can put a damper on your business sales. If your employees are cramped for physical space or if you don’t have the room for product (and therefore can’t fill all of your orders), you might want to look into renting or purchasing a new space for your business.
7. The People Want It
Give the people what they want and your business will benefit. When you started your business, you began by figuring out what people needed that they didn’t already have. Chances are that process was reliant on market research and a little bit of educated guessing.
Now that you’re in business, your customer base can do that work for you. If your customers keep asking you about a new location or a new product, they’re already demonstrating a demand. Once you grow, your expanded offerings—whether hours, locations, services, or products—should aim to meet those demands, which will set you up for business success.
8. Your Industry is Expanding
If you take a goldfish from a small fish tank and put it in a pond, the fish will grow into the size of its home. The same can be true for small businesses. If your industry is rapidly expanding, that may indicate that there’s greater demand for your business too, which can make expansion a little easier.