Is it time to expand your business?
MANILA, Philippines – As an entrepreneur, you should continuously look for things you can improve on and novel ideas you can introduce to your customers. If you’ve enjoyed a good amount of success and are comfortable with your current operations, consider expanding your business. This won’t only get your creative juices flowing again, it will also bring in new revenue sources, which is always a good thing.
But expansion isn’t something you do with eyes closed. Below is a list of things you should have before expanding your business. If all things check out, be excited because you’re about to embark on a rewarding, albeit demanding journey.
Is it the right time to expand?
There are no set milestones to look out for because each business is different but generally, make sure that your existing business is in good standing – meaning you’ve gotten back your investment and have already started earning from it.
Treat your first business as a guinea pig. According to Francis Hernandez,* owner of a facial spa business that has 8 branches around Metro Manila, it’s imperative for business owners to study their first branch very well.
Experiment, see what works, and duplicate whatever does on your next branch. Before opening his second branch, Hernandez waited to recoup their investment. He says, “It’s easier to adjust and correct mistakes when there is only one branch and only a few employees involved.”
If you feel that your business isn’t quite ready for expansion yet, consider growing it in other ways like improving your marketing strategies and updating or increasing the services or products you offer.
Why do you want to expand?
What is the driving force behind your business? Is it to make people’s lives easier? To share innovations? To introduce cultures through food? Or something else? Answer these questions first.
Knowing your “why” and putting it side by side with what the market needs will allow you to discover your product’s unique selling proposition. It will also help you make tough decisions: if something doesn’t adhere to your “why,” don’t do it.
After establishing your “why,” move on to more concrete objectives. Dulce Alimbuyuguen, Small Business Loan Sales Head at BDO, suggests that you determine the following: your long-term and short-term milestones, resources needed to achieve these goals, and the internal and external financing needed to fund these resources.
Where do you want to expand to?
Expansion can mean different things so figure out how exactly you want to expand your business. Do you want a new branch? Are you considering opening an online store? Do you want to go international or try a related but completely different idea?
Learn more about what your competitors are doing and see how you can set your business apart. Look for locations with the same profile as your first branch and see if there are any stores that sell the same products. If there’s none, then that’s an untapped goldmine.
How much will you spend for the expansion?
While expansion leads to increased profit, it incurs increased operation costs as well. Before taking the leap, estimate security deposits, construction costs, equipment, and so on. To be on the safe side, Hernandez suggests that you add a buffer of 30% to your actual estimate, which will cover miscellaneous and unexpected expenses.
It’s ideal to use internally generated funds from the business but if you want to strike while the iron is hot, you can also look into loans. BDO’s SME Loan is a short to medium-term facility that helps entrepreneurs with additional working capital, purchase of business assets, and other business ventures like franchising.
Do you see yourself being able to manage your time properly?
Remember that expanding your business also means more work, so check if you’ll be able to squeeze everything into your daily 24 hours.
As you venture into expansion, make a list of your priorities and figure out which ones you have to do yourself and which ones you can entrust to others.
Hernandez shares: “We hired managers that can be delegated to handle the day to day operations of the branches. We split our time between the branches, depending on what branch needs more of our attention."
Once the road to expansion is clear, create a good system for operations, manage your people well, and set clear company policies to make sure your business continues to run as smoothly as possible. – Rappler.com
Expand your business and increase profits at the same time. Borrowing from a bank can be the more profitable path to growing your business. Watch this video to see why:
Whether you want to expand your business or purchase additional inventory, BDO SME Loan offers you financing options with your business needs in mind. Click here for more information on how to apply.
*Name has been changed to protect privacy