Expanding your small business? Five tips for consideration
One of the great benefits of owning a small business is reaping the rewards of its growth, over time. Expansion can be exciting, but it’s important not to get too carried away with your growth plans. After all, expansion often represents a significant investment of your time, money, and effort. Like any investment, there are a number of factors to be taken into consideration – such as accounting matters, timing, and market demand – to ensure that your small business is ready.
Before you fully commit to an expansion, be careful to consider the following:
1. Operational Readiness
When making any significant decision in business, timing can be tremendously important. Be sure to ask yourself:
- Are your current operations relatively profitable? Expansion can put a strain on resources, particularly when your plans necessitate a temporary disruption in your production or supply chain. You will need to make sure that you can compensate for this potential slow-down.
- Does this expansion “cook the golden goose”? There is a reason that your business is thriving. When preparing for expansion, it’s important to ensure that your growth plans don’t undermine the core business that brought you success in the first place.
- Do you and your team have the time to devote to the process? Be sure that you have the manpower, structure, and skills required by your expansion. It is important to identify a leader, during the expansion process, with the authority and responsibility to ensure success.
- Are you building on bedrock, or quicksand? Make sure you and your business are on solid ground before trying to expand – failing to ensure that your business has the requisite stability can greatly increase the likelihood of failure.
2. Capital Structure & Small Business Accounting
Your capital structure is the framework upon which your expansion will be built. Be sure to consult with your accountant to analyze your financial situation prior to expansion. Your accounting advisor can ensure that you have the right capital structure in place to afford the related expansion expenses, such as additional inventory, new facilities or equipment, and salaries for new hires.
A few other tips for consideration:
- Keep an eye out for hidden costs, risks, and unforeseen hitches.
- Don’t let your growth plans bury you in debt. Make sure the expansion will be profitable enough for you to earn money and repay any loans.
- Take a look at your current legal structure to ensure the new operation is set up properly to take advantage of tax rates and government incentives, and to ensure that a failure of the expansion would not harm the existing business.
3. Thoroughly Research Your New Marketplace
Just because something works in one region or on a small scale, doesn’t necessarily mean that it will work in a different neighborhood, or on a larger scale.
Market research can help you test the demand for your product or service, and pinpoint a region, population, or niche for expansion that will satisfy prospective customers/clients.
4. Don’t Rely on Only Canadian Regulations When Crossing the Border
If you’re expanding across borders, you need to make sure that your business is compliant with the tax regulations of both countries.
This can be a complex endeavour, that varies widely depending upon which borders you will be crossing. Always consult with a tax advisor who specializes in international accounting before tackling any expansion outside of Canada.
5. Consider Teaming Up (Or Buying Out)
It’s often easier and less expensive to work with an existing and established entity within a region, service, or product line, rather than ‘horning in’ as an unknown newcomer. Partnerships with, or outright acquisition of, existing businesses can grant you access to existing clientele, distribution channels, employees, infrastructure, and equipment.
Seek Professional Advice
It’s always best to have an experienced set of eyes to help guide you through the process of expansion. A professional business advisor at Fuller Landau can help you plan ahead for growth, provide advice to help the expansion run smoothly, and identify hidden expenses that you might otherwise miss.
If you are considering an expansion for your small business, contact us today to schedule a consultation with one of our experienced business advisors.