Expanding a small business is not easy task and should not be entered into without serious consideration.  Expansion will require your devotion of time, resources and financing.  Before you expand your small business consider these things. 

 

Proven Track Record:  Before you expand you should make sure that the business has a proven track record of success in it’s current location.  There is no point in expanding if the current location can’t sustani itself.  The current location must be successful enough to support it’s own operations and provide enough working capital for another location.
 

Know Type of Expansion:  there are four(4) ways you can go about expanding the small business:  Franchise, wholly owned, Merger & Acquisition (M&A) or Joint Venture.

 

Franchise:  You can expand your business by creating a Franchise.  Franchising is a right granted a third party or independent operator under a license agreement to do business under the umbrella of an existing organization (Franchiser) thereby selling the organization’s goods and services while utilizing the organization’s trademark, marketing methods, name recognition and business process to do so.  The third party or independent operator is known as the Franchisee.  The Franchisee will be required to pay a monthly franchise fee based on revenues or profits.  Learn more about Franchising.
 

Wholly Owned:  You can expand the business in other locations as wholly owned entities.  That means that you retain full ownership of every location.
 

Merger & Acquisition:  If your competitor already has a foothold in an area that you want to expand to maybe it would be better to buy that business out.  If that competitor is already attracting the customer base you’re after it may cost you less to buy them out.  Learn more about M&A.
 
Joint Venture:  A joint ventures is an agreement between two parties in which they agree to cooperate on short term basis to advance their mutual interest by contributing equally.  All parties exercise control over the enterprise and share in the revenues, expenses and assets.  The joint venture is dissolved when the project is completed.

An example of a joint venture would be four(4) separate companies in the construction industry (electrician, carpenter, plumber, mason) could form a joint venture to provide an umbrella of services to to individual customers or to a larger construction company (prime contractor).  They could also compete for larger contracts.
 
 

Budget:  Before you expand make sure that you have a budget that could support the expansion.  It must take into consideration hidden and unforseen costs.  It may take some time for the new location to get up and running to start providing enough income to covers it’s operating costs.
 

Team:  You need a good time in place at the current location before you can contemplate expanding.  They should be very familiar with your procedures and techniques.  Once you have a good team in place, you then have to work on building the team that will manage the expansion.  If you may have to bring in new personnel or use existing personnel if it doesn’t pose a risk to current operations.  The team that will work on the expansion will have to be fully dedicated to the task.
 

Procedures:  Before moving forward standardize your procedures.  Create standard operating procedures (SOPs).  These are document steps that describe how critical tasks are performed in the organization.  Documenting these procedures make it easy to get new personnel trained, it gives consistency to delivering the products and services and it keeps all locations in tuned with the organization’s standards.
 

Test:  Before you move into a new area test the product in the new location to determine if there is a customer base there that is interested in it.  Don’t assume that it will gain widespread acceptance in another location because it is in demand at your current location.   Test and find out before commiting your precious resources to expanding to a new location.  Learn more about testing the growth prospect.