Every entrepreneur dreams of eventually expanding their business. Whether you do so by adding new offerings or expanding your customer base further to include new local or even international markets, you can look forward to increased revenues and a wider reach if you achieve your goal. But like many things when it comes to doing business, this is easier said than done, and you will want to do your homework with regard to your financial planning to ensure your business has the means and ability to go that far.
If you’re looking to expand your business in the near future, below are some tips to make sure that your finances and your resource management approach can support the activities of this new chapter:
1) Be Strategic about Budgeting and Forecasting
If you want expansion to be a viable option for your business, it’s not enough to simply have stable finances. In fact, that should be your minimum requirement.
One key step you should take in your financial management is to improve upon your budgeting and forecasting approaches. On top of knowing how to calculate how much it will take to operate a new branch of your business, factor in other associated costs like construction, marketing, acquiring new equipment, and hiring new personnel. You’ll also need to learn how to draw up an accurate financial forecast to see if the expansion is truly worthy as an investment or if it’s nothing more than a money drain. It’s better to be able to tell the difference sooner rather than later.
Big companies will usually have an entire team dedicated to studying whether the expansion will be profitable or not. A smaller business should rely on its sales records to see if its revenue stream is steady enough to support expansion expenses. If you need an expert’s opinion on something as important as this, don’t hesitate to hire a consultant.
2) Diversify Your Revenue Stream
It would also be wise to diversify your current revenue stream. Even if your current sales look great, it’s risky to rely on them solely. Remember the old adage of avoiding putting all your eggs in one basket. Look into other ways that your business can make a profit to further boost your finances in light of your planned expansion.
Alongside this move, if you’re based in the country, look for a business banking Philippines provider who can help you stay on top of increasingly complex financial matters. Maya, the Philippines’ leading digital bank, is one of the best options for entrepreneurs handling their finances for business expansion thanks to solutions like Maya Business Deposit.
3) Invest in Technologies That Will Improve Your Financial Management for Expanded Activities
It would also be good to invest in technologies that will advance your financial management capabilities for the increase in business activity. This could mean equipment that speeds up your production or automation systems that can make operations more cost-efficient. The right technology investments will help your business adapt better to the growing needs of your customers while also lowering some of your overhead costs for both your current and new business activities. This, in turn, will make the expansion less likely to drain your finances.
Take note that a business expansion comes with heavy expectations. Loyal customers will expect the quality of your products or services to remain the same, even if you’re spending more money across new branches or on new raw or finished materials. Meeting their expectations, as well as those of your new customers, will keep your revenue steady.
4) Consider Opening Up Franchising
Franchising is also an option if you’d like to expand your business’s reach, but do so in a more cost-efficient manner. Through franchising, you’ll allow other individuals to operate a branch carrying your branding, products, and business practices in exchange for a franchise fee. This approach may enable you to expand your reach to new locations without having to foot the bill for construction and personnel hiring.
However, remember that your franchising agreement isn’t an excuse to be completely hands-off with your franchisee’s operations. You will typically be expected to carry out training and support for your franchisees, as well as screen them to ensure that they’re the right people to share your business practices with. If you think this is a viable option, check with a business consultant first to see if it’s a suitable approach for your business.
5) Review Your Prices
The right prices for your products or services after your expansion can depend on multiple factors—the cost of your supplies, the market demand, and your competitors’ prices, among other things. If an expansion is imminent, make sure your current prices are up to date. Regularly review your pricing strategy and be prepared to adjust it to meet your financial needs during and after the expansion proper.
Your choice to expand instead of settling on the current size and abilities of your business can do a lot for your company’s longevity and relevance to future markets. But knowing the challenges you’ll face, especially to your budget, take every effort to financially prepare your business and retool your financial management approach as necessary using tips like the ones listed above.
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