Every startup has the goal of growing and, eventually, expanding to different markets around the globe. It is a challenging endeavor that only a few have achieved. Apple, Google, Microsoft, Facebook, and Amazon were once startups that grew, expanded, and now are empires with reach across almost every country.
However, the one barricade preventing many businesses from expanding is budget. It costs money to scale. New offices and equipment have to be acquired. New employees with different skills need to be hired and onboarded. The business also has to spend on marketing to capture the interest of consumers in a new market you want to enter.
It is not just a challenge. It is an expensive challenge. But, if all those other businesses managed to expand globally, so can you.
Assess Your Financial Situation
Your business has seen some successes recently, but that does not automatically mean that you are ready for expansion. Take a peek into the finances and see if you really are prepared to enter and explore another market.
You need to be honest. Outstanding debt can be a major problem. Your cash flow could be an issue, too, if more money is going out than coming in or there are noticeable inconsistencies quarter after quarter.
In addition, before taking any major step toward expansion, be honest. Is there really potential for the business to thrive in a new market, or do you need more time to strengthen your products and services? Is there demand in the market for your products and services that no other brand is providing yet?
Start Freeing Up Cash for Expansion
Even if the business is looking good on the financial aspect, you still need to free up money and reduce expenses. Businesses, too, need to save up in anticipation of incoming expenses. You need to increase your spending to make the expansion a reality.
You might need to reorganize current processes to improve efficiency and cut down on unnecessary wastes of time, tools and equipment, and, of course, money. You would be surprised how streamlining your current processes will improve the overall performance of the business. It can even improve your profit.
It might also help your business get a cost segregation or cost seg, a strategy in which a recently constructed company purchased, expanded, or remodeled a real estate property assessed for tax purposes. It has helped businesses in the past to increase cash flows by identifying deductions and other money-saving tactics. While not all businesses can reap benefits from it, many do. It is the right decision, especially when you have made recent major real estate acquisitions such as a bigger office building or warehouse.
Estimate Potential Expenses
Next, figure out how much money your business will need for the expansion. As was mentioned, the expansion will be an expensive endeavor, and you have to at least have an idea how much exactly will need to be spent. That way, you can form a budget and be better prepared for the demands of expansion.
Create a list of things you need to figure out. Additional employees, for example, will need to be hired. To cut costs, you can start by outsourcing certain tasks to third-party services or from talents abroad. There are new equipment and facilities that need to be acquired, many of which will likely be expensive. Renting is, of course, an option. You also need to build and expand your inventory to cater to the needs and demands of consumers in a new market. Not all consumers are the same. Everyone has different preferences and priorities.
Predict Potential Income
At the end of the day, an expansion is only successful if there is profit to be made from it. Making an estimate of potential income will not be easy nor accurate, but it is an important part of the process. You will need it in case you need to convince investors or partners.
You will need to calculate optimistic and conservative sales and revenue projections. You can use existing data to determine a potential income from expansion. For example, if you have a successful branch in a similar market, you can use its performance as a compass for your estimates.
Remember not to be optimistic in your projection because it might cause you to overshoot and end up losing not earning money from the expansion.
Many businesses want to expand, but taking the steps before you are ready will only be detrimental to your current growth rate. Before deciding to expand your business, make sure to assess your financial situation, improve cash flow, estimate expenses, and predict future profit.