By Ben Thomas
Your first few steady customers are finally paying all your bills – and as celebration-worthy as that is, it also raises new questions in need of executive answers. Where are the next few customers or clients going to come from? WhatÂs a reasonable advertising budget – and how much is too much? How will hiring a new employee (or three) or renting some new space impact your rate of expansion?
Questions like these can make your small businessÂs first expansion feel at least as stressful as your initial launch – but a little intuitive knowledge of your expansionÂs objectives, boundaries and processes can reduce even the most complex decisions down to simple ÂyesÂ or ÂnoÂ analyses. Here, three small-business experts share the analytical strategies that have become second nature to them as theyÂve progressed through their own business expansions.
Flow like water
ThereÂs an old saying that water is stronger than rock, because water never cracks – it just reshapes itself to fit whatever surroundings itÂs in. The exact same principle holds true in business: The more your expansions – and shrinkages, if and when those come – all follow naturally from the size and shape of your market, the less likely youÂll be to overextend yourself and fragment your team.
In other words, the clearest signs that itÂs time to expand are those that make it harder and harder not to: When youÂve got so many customers that sales are slowing you down; when products are selling out too quickly for your space to hold onto stock; when you find yourself giving a lot of referrals for a service you could be providing – and so on. In cases like these, thereÂs probably no reason to delay an expansion, even if it feels a little intimidating.
ÂWhen we started, we only had a small space and we only had one room,Â says Donna Alexander, founder and president of Anger Room. ÂBut we started getting so much publicity, and so many customers coming in, that we actually had to start turning people away. And that was like a big neon sign: ÂOK, itÂs time to get a bigger space.ÂÂ
By the same token, the clearest signs that youÂve overextended your business are those that feel like hitting some kind of wall: When the money youÂre pouring into new ads and/or spaces isnÂt correlating with any return; when training a new employee is slowing down sales; when you find yourself starting to give referrals simply because you canÂt handle the volume – and so on. Although these signs donÂt necessarily mean that you canÂt expand, they do point to the fact that youÂve got some bugs that need to be worked out.
Scan for indicators
Even if youÂre not drowning in customers, your interactions with the customers you do have can serve as strong indicators about whether itÂs time for an expansion – and if so, what direction that expansion should take.
ÂYouÂve got to listen to your market, because with every sale – or lack of a sale – those people are telling you what you do for them, and if you could be doing more, or doing something differently,Â says Carolyn Andrews, a certified business and executive coach with Actioncoach. ÂOne of the most important things about timing your expansion is looking at how your market perceives you.Â
It doesnÂt take a market research firm to find out how your customers feel – it just takes some mutually honest conversations.
Those conversations will come in handy as you analyze the shape your sales are taking, and the reasons why. Which products or services are you selling more or less of than usual? What changes in your market could account for those shifts in sales? WhatÂs your competition doing in response? Does their response leave a new vacuum into which you can expand? ÂHaving a really solid handle on what’s happening in your market is crucial,Â Andrews says, Âand itÂs so much easier to get personal insight into your marketÂs behavior when you listen to what customers are saying to you.Â
Andrews advises looking for Âgreen lightsÂ on all three indicators – positive customer conversations, promising sales analysis and under-adaptive competitor behavior – before you make the leap into your expansion. ÂWhen you analyze your potential for expansion in terms of those three indicators,Â she says, Âyou end up with one simple answer: a ÂyesÂ or a Âno.ÂÂ
Jump straight in
Leaping into your expansion isnÂt just a figure of speech – the only way to be sure your expansion will succeed is to throw everything youÂve got (yourself included) into it.
ÂIn the end, thereÂs no such thing as a perfect time to expand,Â says Stacy Deprey-Purper, founder and CEO of Better Business Together. ÂBut you and your staff still have to jump in with a Âwhatever-it-takesÂ attitude, because thatÂs where your reputation, your customer need and your buzz ultimately come from.Â
Still, jumping in doesnÂt mean jumping blind. So take as much time as you can afford and draw up a clear plan for your expansion, including employee roles, steps of the expansion, timing projections and so on. ÂI say that everybody needs a plan… so they can deviate from it,Â Deprey-Purper says. ÂYou donÂt need a detailed long-term plan, but you need to have some idea of what youÂll be spending and where itÂs going to go. I had a client the other day who spent $50,000 on decorations for his restaurant, which ate up 99 percent of his marketing budget.Â In short, check that your plan makes sense as a whole before you start throwing money at specific parts of it.
A trusted group of advisers can help on that front – and that can mean a business coach, other successful entrepreneurs, consumers in your market or even a lawyer. ÂWe were once approached by a group of investors who seemed very kind and polite in person, but who actually wanted to take over our company,Â Alexander recalls. ÂWhen we sat down to sign the paperwork, they suddenly told us, ÂWe want 90 percent of the company, and youÂll get the other 10.Â Luckily weÂd hired a lawyer to look over the papers for us.Â ItÂs situations like this that demonstrate why itÂs vital to have some professional second-guessers in your corner.
At the same time, though, itÂs important to keep in mind that youÂre the boss, and that the decision depends on your instincts in the end. ÂIf youÂve got too much thinking and not enough doing,Â Deprey-Purper says, Âyou can overthink yourself out of taking action. No matter how much planning you do, youÂll always get some curveballs – and you have to take those as opportunities to learn about your business and plow forward.Â