The utmost priority of every entrepreneur is to create value in the project they have spent many resources on. That is to ultimately expand their business and scale up to a prominent enterprise. But what’s the perfect context of expansion?
Is it to acquire new office space, hire extra help, sign to a major new partnership, obtain other decent resources or, is it going global? Before expanding your startup, you must ensure your company is ready to take the next level in whichever context. Bear in mind premature scaling is often a top reason why even the most creative and promising ventures shut their doors. Expanding too soon might lead to high, unexpected financial obligations and costs, increased workloads and stress and a drop in quality.
Conversely, if you don’t scale up, you will likely remain stagnant around your competitors and industry; consequently, your startup will taper off to become another failed entity.
So, how can you tell when your startup is ready to go to the next level? Here are the signs you should be on the lookout for:
How to Tell Your Startup is Ready For Expansion
First and foremost, you do not try to expand your startup if you struggle to reach your current goals. Also, don’t sorely rely on your recent business success.
The Stability of Your Startup
You ought to have a stable foundation, especially if you are considering going global. What we mean by stability is having the right amount of a talented workforce, an efficient marketing strategy, and digital transformation. Also, don’t overlook the importance of having a stable supply chain.
Expanding your startup by going global implies facing new and different challenges in the international market. To counter these issues, you must ensure your startup has invested in the outlined factors.
Your employees must be able to handle the stress and pressure of venturing into new territories. If contrary, they will burn out and will not stick with your company in the long haul. Also, you might consider working with an international PEO provider to outsource management. Incorporating the services of a PEO in your startup operations enhances the overall stability as you can focus on making the business stable as they take over employee recruitment processes and payroll management.
You Have the Resources to Support This Growth
Expanding your startup increases the costs of your operations. As a result, you ought to be prepared for new expenses, both expected and unforeseen. Ensure you have enough revenue and cash flow to incur the costs that may accrue as you scale up. And it goes beyond money. The expansion will require other types of resources such as inventory, staff and time.
Keep a cushion of cash on hand to ensure consistent cash flow through your organization. Even after expanding, you have to be wary that it may take some time before you see initial returns on your investment. As a result, you must maintain an account balance that can cover at least six months of operating expenses. It’s vital to ensure your expansion efforts won’t plummet you into bankruptcy.
Once your startup starts gaining traction and the product/service demand exceeds the supply, you should consider expanding your business. This is typically the most lucid sign that it’s time for expansion. Also, if you are working long hours or more clients are coming than you can handle, it would be best to broaden your operations instead of turning them away. Hire or outsource extra talent to ensure the customer experience is top-notch.
Losing new opportunities simply because of increased workload could be consequential for the future of your venture. First, hiring an extra hand, even if momentarily, is more feasible than putting potential customers on the waitlist, or worse, shunning them away. Second, and most importantly, you have to ensure it’s not a seasonal fluctuation that will leave you overstaffed when it comes to pass.
Availability of Efficient Systems
Business growth is inevitable with the proper and functional systems. Basically, efficient systems revolve around having the right technology, organizational structure and framework, investing in digital marketing plans, the relevant knowledge sharing tools and significantly updating these with trendy integral information on company processes is enough motivation for business expansion in any industry.
The proper organizational structure or sturdy infrastructure such as automation keeps everything organized. That is from a streamlined onboarding process of new employees, efficient management of resources, enhanced utilization rates to enhanced customer experience.
A Golden Opportunity Surfaces That’s too Lucrative to Ignore
In some cases, you don’t have to rely on consistent performance, steady flow of income to take your startup to the next level. Entrepreneurs can harness the immense power of golden opportunities to scale up.
The opportunity has to be a low-risk investment that won’t strain your startup’s operations. Therefore, you should seize on opportunities with the following characteristics:
- Difficult for your competitors to copy or attack.
- They shouldn’t interfere and hinder the growth of your primary business model.
- The opportunity should have low barriers to entry. That is, you should easily access them without deploying a substantial amount of resources.
- They should align with your intended market and domain environment.
- Finally, they should offer a helpful service.
Nonetheless, before allocating resources to any opportunity, it would be best to be flexible and willing to change direction.
We have outlined in detail 5 clear signs your startup is ready for expansion. Ensure you checklist at least four of these signs before beginning the expansion. Most importantly, as an entrepreneur, understand your organization wholly to understand its capacity. Remember, don’t get caught up by moments and expand too soon or else you will lack what it takes to survive.