Planning For Profitable Business Growth

We are living today in the most turbulent time in business history. It is a time of rapid change and uncertainty. Because of this most business owners believe that growth is too risky and bad. They believe many businesses have failed because they grew. They believe that to succeed you need to just stand still and just keep doing business they way it has always done and eventually the market will become more stable.

Don’t believe it. Businesses don’t fail because they grow. They fail because the don’t manage their growth. If there is a lesson to be learned from the wreckage of the past couple of decades, it’s that there’s no substitute for sound business planning. Those who don’t know why they are growing, or haven’t analyzed how growth fits with their long-term goals, will inevitably fail.

The coming of the Information Age and the growth of the Internet has opened up business opportunities that were once unimaginable. New domestic and foreign markets can greatly reduce risks of business expansion by taking up the slack if there’s a slump in your existing market. It is so much easier today to branch out into related businesses to snap your company out of its doldrums, and open up a whole new world of thrilling opportunities.

But make no mistake about it, expansion does change your company. Growth by adding a new product line, forming a strategic alliance, or acquiring another company, makes everything multiply in size. If you don’t plan and manage your growth well, you will end up with more problems than you can handle.

Is growth right for your company? Here are some important questions you need to ask yourself before you decide to expand your business: Is your company meeting the demands for its products or services in current markets? Do you see potential in markets next door, across the border, or even overseas? Do you have enough resources in production, materials, people, finance, and time? Do you have a proven ability to plan strategically and follow written business plans? Do you see growth as a way to strengthen your business, and not as a way to solve current problems?

If you answered no to any of these questions, you should not expand your business without laying more groundwork. But, if you answered yes to all the above questions then you are ready to expand.

Expanding your business requires commitment. You must explain to your management team and other employees how growth will benefit the company. If even one person at a relatively senior level in your organization isn’t convinced that the company should grow, it means one of two things. Either your reasons are not good enough, or the person won’t buy into it no matter how good your reasons are, in which case there’s no place for him or her on the team.

As you consider a plan to begin growing your business, ask yourself a few more important questions: Is ego driving your desire to grow? Are you growing to gain increased personal power and prestige? Is your plan based solely on the fact that you are already successful? If you answered yes to any of these questions, your plan for expansion probably won’t be successful.

If your business is going to expand and grow successfully you and all your employees must possess knowledge. Knowledge is power, and knowledge of your industry and the economy is essential to expanding successfully.

Knowledge of your industry brings a sense of timing, one of your greatest assets when expanding. The right timing helps you to know what moves to make and when. For example, you must know which of your competitors are doing well, and which are hurting. This knowledge allows your company to negotiate deals at the best time and at the best price.

When you are considering whether growth is right for you, be sure your company has adaptability to new markets. For example, if you sell snow removal equipment, it would probably be difficult to move into the Florida market. While this sounds obvious, many companies have gone out of business because they became so excited about the idea of expanding to a new market that they overlooked the fact that no one there wanted to buy what they were selling.

Before you can embark on expanding your business, you need to put your plan on paper. Your business expansion plan should be separate from your original business plan. This plan should be specifically tailored to your business expansion and needs to spell out your costs, financing needs, and help you to track your progress toward your goals.

A good business expansion plan should have three main elements:

* A narrative section that documents objectives, strategies, assumptions, and sets your timetable.

* A financial analysis, including and income statement, balance sheet, and cash flow projections.

* A sensitivity analysis, to determine how variables; such as shifts in interest rates, changes in pricing structures, or slower-than-expected sales, will affect you and how you can adapt.

Because of the Internet, expanding your company can mean you’re doing business on the other side of the globe within seconds or just winning customers in your own backyard. Even if you aren’t aiming for distant horizons, you must protect your current position through internal growth. This will also make it easier for you to move into new markets when you are ready.

Growth within your existing market can be accomplished in a number of ways, one of which is being more competitively priced. Check to see if your are as low-cost as you can be. The bottom line is to control your cost, which may mean paying employees slightly more for higher productivity and investing in better ways to deliver your product or service.

Internal growth can also come from improving your marketing, adding new products and services or value to existing ones, or opening more locations in your existing markets. But where should you open? What should you add? How can you better market your business? The answers can be found by learning more about your customer’s needs.

Once you have successful internal expansion underway it is time to expand into new markets. In determining where to target your expansion, think of your objectives. If you want to protect your company against regional economic cycles, choose markets that are subject to different economic swings.

Another objective may be to give your company such as wide-ranging national or international presence that you can outmaneuver your competitors, in which case you should target numerous markets across the United States and Internationally.

Whatever your strategy, be sure to do your homework on potential new markets. Before you enter, find out about the customer, the market size, the competition, product and service demand, pricing, methods of marketing and merchandising, packaging and labeling regulations, environmental regulations, labor issues, tax issues, and the ability of the market to serve as a marketing hub for other regions.

No matter how you choose to pursue growing your business, be it internally, through acquisitions, or by entering new domestic and foreign markets, the most important thing to remember is that growth introduces your company to many opportunities. It allows for increased profits, protection from recessions, improved quality and efficiency, and, most of all knowledge. Business growth is about learning. New horizons open up new and better ways of doing business.

There’s no question that growth puts your company at a certain level of risk. But, in the final analysis, standing still places your company in even greater danger, the danger of losing everything. Perhaps you’re satisfied with the products, customers, and competition you have now. But that doesn’t mean that your competitors, both nearby and abroad feel the same way. While you may pass up the opportunity to expand, other companies could be studying your market, and crafting plans for their own successful business expansion.