Why Grilled Cheese Could Inspire You—Knowing When to Expand Your Business

Posted by on September 9, 2011 in Business Financing, Business Management, Business Valuation [ 0 Comments ]

In today’s economy, you know that if you have a good thing going, you have to keep it going. Recently MSNBC reported on Jonathan Kaplan, creator of the company behind the Flip Video camcorder, who has decided to take his earnings and open up grilled cheese restaurants. He hopes to open 25 to 50 within the year, and 500 within five years.  After reading about Kaplan’s plans I got to wondering: Is it really a good idea to be expanding a business in this economy?

The benefits of expanding a business can be great. Expanding your business will give you:

–       An advantage in sales                            –    Will help you land major contracts

–       An advantage in exports                      –    Dominating your niche

–    Yield higher profits                                   –    Recognition of your brand

However, expanding a business can be tricky work, and you do not want to expand your business too soon. Consider some of the things a small business owner should be thinking about before expanding a business, and decide for yourself if Kaplan’s grilled cheese will take off or if his success will stop at the Flip phone:

Consider These Tips BEFORE Expanding Your Business

1. Consider your finances

This is the most obvious consideration, but it is also one of the most important factors when it comes to assessing whether or not expansion is in the near future. If you need to take out a business loan, calculate how much revenue this expansion will bring you, and then calculate the new expenses—more employees, more facilities, and more equipment—to make sure that you will not fall into debt. If you are unsure whether or not you will make a profit with the expansion, it is probably not worth the risk given the current economy.

2. Consider the current economy in relation to your business

If you are thinking of expanding your business, chances are your business is doing well even in this tough economy; however expanding a business means thinking on a larger scale. You need to ask yourself who is buying your products or services. If you have had a solid customer base for a while, but little to no new customers, expanding your business would likely lose you money. If you do not have a product or service that people really need, it may be a better idea to wait until the economy improves.

3. Consider your competitors

Believe it or not, watching your competitors expand is a good thing. If you see that a company similar to yours is expanding and doing well, you will have a better idea about how your company would do in the same situation. If another company can do it, so can you.

4. Consider what your role will be in the company

It is important to remember that you should never feel forced to expand a business. Once your business is no longer a local commodity, your role is sure to change. You will need to enlist the help of others, and you will likely give up some of the power within the company. Any veteran business owner who has expanded will tell you that it is hard work, so if you’re not up for all the work, you don’t have to expand.

5. Consider your existing customers and current company

Often times expanding a business focuses entirely on the new financial plan, the new building, the new employees, and of course, the new customers. However, it is never a good idea to neglect the business and the customers that brought you success in the first place. If you do not feel that your current business is stable enough to stand alone without your constant attention, do not take the risk of expanding.

Expanding a business can be a huge risk, but considering a few of the tips listed above should help you feel confident. After all, if you can sustain a successful company in today’s economy, there is a good chance you have what it takes to grow your business, whether it be a video camcorder or a grilled cheese sandwich.

Photo Credit Amazon.com

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