Overview
Small businesses
become big businesses through expansion. In most cases, business expansion
occurs due to an increase in demand, an increase in efficiencies, new
production lines, more diverse or international markets and the need to bring
certain functions, such as logistics or manufacturing, in-house. Planning for
expansion is a strategic exercise, which involves identifying the exact need
for expansion. After this, you can focus on the need and develop more defined
estimates of the time and capital required to implement expansion efforts.
Step 1
Identify exactly, what needs to be expanded?
Expanding for the sake of expanding might lead to increased inefficiencies.
Determine exactly what parts of the business you wish to expand. Producing more
product does not necessarily translate into a broad expansion across the board.
This approach does not take economies of scale into consideration. That is, you
may not need to expand administrative functions and/or move into a larger
building. Perhaps you need only hire more staff and/or purchase additional equipment.
Step 2
Determine the effect
of the expansion on personnel. Consider hiring part-time workers until the need
for full-time work is certain. Also, remember that payroll for increased
personnel should come from the increase in revenue, not outside funding.
Step 3
Develop training
programs for employees. Communicate expansion efforts and goals with employees
through training sessions. Train a few of your best employees and then have
them train others. If purchasing new equipment, have the seller provide training
to staff.
Step 4
Consider expanding through the Internet. Brick and
mortar (traditional building space) costs a great deal more than the cost of
maintaining a website. This is also a great way to reach overseas clients while
extending your hours to 24/7.
Step 5
Purchase or lease additional space only if
necessary. This poses a significant investment and should be analyzed
carefully. Until then, consider efforts to maximize the physical space of your
current location.
Determine new routes and plans for logistics. With
additional customers comes the need to service a broader customer base.
Identify those logistical needs that need to be augmented.
How to
Create a Business Plan for Expansion
Expanding
your business is an exciting proposition. It means it's doing well and ready to
grow to the next level. But often a business needs financial support to
implement expansion ideas. A professional business plan that outlines the
expansion details can earn the money needed to grow the business.
o
Write an executive
summary that outlines the business' history, including its successes and
accomplishments. It should also cover the business' goals, current facilities
and equipment, and employees. Include information on the proposed expansion,
such as a larger facility or new equipment.
o Describe your target
market by demographics, such as age, gender and socioeconomic status. Indicate
your current marketing tactics and how they are implemented. If you'll be
changing your marketing plan with the expansion, outline these changes.
o Provide details about
your competition, including differences and similarities in services, target
market and marketing tactics. Focus on how your business is unique from others
that offer the same type of service or products. Elaborate on how your
expansion will set your business apart from the competition.
o Provide information
about your management team. Give their names, duties to the business and
information about their skills or training as it related to the business. If
you'll be taking on new partners or managers in the expansion, provide details
on the duties and attributes to the business.
o
Outline the daily
operations of the business. Describe the day-to-day activities; such as
providing services and marketing, as well as who is responsible for assuring
these activities are completed. If the daily activities will change with the
proposed expansion, provide information on what will be different.
o
Provide financial
details about the business, including current statements that show expenses and
income, and net worth. Outline the costs related to the expansion as well as
projected profits over the next year.
o
Include an appendix for
supplemental materials that don't fit in the other sections. For example, if
your expansion is adding on to or building a facility, include blueprints of
the proposed project. This section is also used to provide other documents,
such as permits.
o
Create a professional
business plan document to show to bankers and potential investors. Use quality
paper and binding, and make sure it's easy to read and free of errors.
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