At the start of a business, you do not always have elegant offices and large profits. Sometimes you start with what you can from where you are. Jeff Bezos attests to having started Amazon in a home garage and his business concept was hardly as innovative as it has grown to be. In fact, Silicon Valley is riddled with stories of humble beginnings that paid off in the end because of hard work and effort. Your company will need to be ready as a business for expansion.
So, you have finally climbed your way up the mountain of being a startup and it is time to scale up. There are many advantages to enlarging your operation. It is a chance to hire more staff and produce larger quantities.
Speaking of which, you can finally rest your back and automate things. For example, you’ve been selling jam while filling and sealing cans manually, you could upgrade to a canning machine. Not only will your production be quicker but your customers also get to enjoy well-packaged products. Expansion sounds like heaven doesn’t it?
Let’s look at some things you need to consider so that your business does not just get bigger but also better.
Before you embark on making any changes, you need to scale your business to find your optimum capacity. Optimum capacity is basically a sweet spot where your business is larger with more clients but you can meet their needs. More importantly at such a capacity you are still running efficiently and making profits.
It can be tempting to increase the size of your operation but the business would not prosper if you overstretch it. How much you can upscale depends on the current size of your client base and estimated growth. On the other hand, if you underestimate your potential you will easily get overwhelmed. The setup you planned to deliver 200 cans will definitely not work if you have a demand for 1000.
No one has the ability to accurately say how much your business will grow, scaling is an estimation. Therefore, model your business for expansion in a way that will be flexible to adapt to future changes if needed.
Cost of Growth
After you have decided on how much you want to expand your business, the cost of it comes into play. Make a budget of what will be required and be as thorough as possible. You can window-shop to get estimates of the inputs that you will require. When all costs are anticipated, you can move on to consolidating funds.
There are many ways to finance growth but they are determined by a few factors:
- Willingness to take on investors
- The ability of the business to fund itself by plowing back profits
- Eligibility for lines of credit
Choose a financing option that you are comfortable with. Bringing in an investor would mean selling off part-ownership of the business. Avoid it if you are unwilling to go the partnership route and explore options with banks instead. On the other hand, if the business can fund itself it should be within comfortable margins. It is unwise to remain with no cash reserves.
The type and quantity of products you make will dictate the kind of machinery you need. Nevertheless, besides your budget, your choice of machinery can be guided by:
Commercial usage results in machines being used for long hours. The brand or supplier you choose needs to have a reputation that preceded them. Explore online reviews and even benchmark with your peers in the business and make comparisons.
The nature of machinery, especially large-scale ones, is that they require special installation and are costly. It will be a great inconvenience if you have to keep getting them repaired. Moreover, bear in mind that unreliable machines will interrupt your operational flow and hence the supply chain too.
Part of growing into a larger business is a lot like becoming an adult; the government holds you responsible for more. In light of this, your production setup should not pollute your surroundings with smoke or other emissions. Local authorities are likely to flag or shut your operations if they are harmful to the environment.
Fuel efficiency is equally important to save you from unreasonable overhead costs of fuel or electricity. Where possible, explore options that use renewable energy. They are both environmentally safer and considerably cheaper in the long term.
A New Home
At some point, Mark Zuckerberg had to move out of the Harvard dorm room where Facebook was started. Similarly, the new size of your business will require new premises to host your new employees and equipment.
The location of your business is a core strategy for prosperity more so in an expansion plan. Seek to find a compromise where: you are not too far from your existing clients and are situated where you can attract new ones. Relevant to location as well, is:
- Safety; of the business and for your clients
- Parking space
- Overall ambiance
In order to know how much square footage you need, consider the size of the equipment and your desired layout. Carrying a rough design of the setup you want could help guide you as you make your decision. However, the cost factor takes prominence, so choose within your budget.
Licenses and Permits
The permits you got to initially operate as a small-scale business may not be valid when the scope of your operations changes. It would be prudent to visit your local authorities and find out what kind of documentation you need to acquire.
Similarly, most premises often require to be modified where industrial usage is concerned. In such a case, you would have to liaise with relevant authorities for matters such as safety inspections. Beginning any kind of operations without compliance approvals may have you shut down and sabotage your endeavors.
In the same way that a child suffers discomfort while teething, so might you as you expand your business. However, they are just that, teething problems. Eventually, you find stability, and operations run smoothly. Employees’ and consumers’ lives will be changed by your enterprise. If that does not inspire you to spread your wings, what will?