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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