Running a business is so consuming that many owners fail to set aside enough time and mental energy to properly prepare for expansion. While growth may be an obvious goal, scaling up without a strong foundation and some forethought can be disastrous. Companies that grow intelligently, purposefully, and strategically are far more likely to catch the brass ring of long-term success.
Here are a few important questions for business owners to ask themselves before taking the leap:
Will you have the capital?
No matter what growth may look like for your particular business, you will doubtless need cash to achieve it. Taking on debt to fuel growth can pay off in the long term, but in the short term you are assuming a great deal more risk. Whether you borrow from a bank or bring new investors on board in exchange for equity, taking the time to evaluate different funding sources is time well spent. While you’re at it, consider whether your new scale will allow you to negotiate better deals with your suppliers and other vendors.
Will you have enough space?
While more space can be an essential component of growth, there is much to consider when opening new locations or expanding your existing location. For example, lease terms should be carefully negotiated; Sears is still trying to recover from 99-year lease agreements signed decades ago when its continued growth seemed inevitable.
Will you have the right people?
Are all your employees in the roles for which they’re best suited? Will key team members need to shift responsibilities? Sometimes growth means letting go of the past—not just obsolete technology and confining spaces, but also employees who aren’t prepared to mature with your company.
Will your own role need to shift?
As a business owner, you may possess the talent and creativity to operate many aspects of the business, but would someone else be better equipped to handle, say, the finances or the marketing? Assess your own strengths and weaknesses and who you might need to bring in to take the company to the next level. Taking burdens off your shoulders will allow you to focus on what you do best.
Are you being mindful of the formalities?
Accurate and current documents can help you manage relationships with employees, vendors, and others and can protect you against potential claims. Updated operating agreements, shareholder agreements, employee handbooks, confidentiality and non-compete agreements, and many more are also essential for mitigating your liability and facilitating growth. Think about your insurance coverage, too; directors and officers liability insurance, employment practices liability insurance, and key man insurance are examples of policies that can protect you, your business, and your employees.
Will you have the right systems?
Every business has systems essential to its success—accounting, human resources, information technology, etc. Are the systems behind your business able to expand and grow along with your company? Are there investments you can make now that will produce dividends in the long run?
Will you be able to maintain flexibility?
Can you stage your expansion to stay nimble and change as you learn? A closed mindset can result in casualties like Blockbuster, which might have survived the boom of digital video had it been open to a changing business model.
Who’s got your back?
Who are your mentors? Is it time to elect or expand a board of directors or advisors? Surrounding yourself with a team of individuals with strong business experience can help you stay on track, anticipate changes, and work through obstacles.
In scaling up your business, planning ahead is critical to success. Choose to be proactive rather than reactive and your business may reap the benefits for generations to come.