Expansion is the aim of many small businesses. They don’t want to remain small, or at least as small as they started out, and want to increase profitability. Expansion can be done in a variety of ways: growing a company’s offerings by adding products and/or services, hiring additional staff, moving to larger quarters, adding additional locations, and going global. Each means of expansion offers its own benefits, but also has drawbacks. All require a lot of planning and thought. Adding products and services and expanding your workforce were addressed in earlier blogs. This blog deals essentially with expanding your real estate, both physical and on the internet.
Larger space
If your business is expanding, you may need more space…to accommodate additional employees, more space to display inventory if you have a retail establishment, or more tables if you own a restaurant. Some thoughts on this:
- Assess whether expansion is temporary or permanent. Forecasting isn’t easy, but it’s important to know whether your business is experiencing a short-term growth spurt or it’s on a long-term growth trajectory.
- Determine whether you can accommodate growth in your current space. For example, additional employees may be able to work remotely, obviating the need for more space at the business’s location. You may be able to reorganize your current use of space to handle growth without needing more space.
- Find out if you can get out of your lease. If you need to move to a larger space, you may need to break your lease. It’s possible to do this, but it may entail additional cost.
- Run the numbers. If you need more space, be sure your projected cash flow can support additional rent. Factor in the cost of moving operations: it’s monetary cost as well as its impact on customers/clients/employees.
Note: Be sure to let the IRS know you’ve moved by filing Form 8822-B, Change of Address or Responsible Party—Business.
Additional locations
If your business is growing, it may be time to branch out. This can be done through additional locations, such as a second store or restaurant. Some thoughts:
- Think about how to coordinate activities in these locations. Who’s going to run things? How can you ensure that your brand is consistent throughout?
- Obviously, there’s a cost for expansion. Do you have the resources to handle it? Consider the additional rent, equipment, insurance, utilities, etc.
- If you expand into new jurisdictions, be sure to think about registering to do business, obtain required licenses and permits, and address income and employment tax obligations.
- Be sure your business policies and systems are adaptable to new locations.
Internet growth
Another means of expansion is adding or expanding e-commerce activities. A business with a bricks-and-mortar operation can offer products and services through its website or an e-commerce platform (e.g., eBay; Amazon). It’s a way for a local business to go national, or even international. Some thoughts:
- Platform selection. Select a platform, such as Shopify, that can best present your offering while keeping within your budget.
- Marketing. Be sure your branding online is consistent with your current operations. Decide how to market your online presence, such as leveraging social media or online advertising.
- Address fulfillment. Who’s going to package and ship? What’s your return policy?
- Payment processing. Be sure you implement safety policies to protect customer data.
- Customer service. With e-commerce, you can’t be there in person. Think about the 24/7 presence and how/when customers can reach you. For example, you may want to add chatbots so customers can get some information if they can’t get through to a live person.
- Legal and compliance. Consider your privacy policy and terms of service that are communicated to customers. Also think about sales tax obligations now imposed by most states on remote sellers.
- IT. Because e-commerce depends on your internet access and protected data, be sure to address security issues. Check your insurance policy to see whether any breaches will be covered or whether you need to add this potential liability to your policy,
Final thought
“Without continual growth and progress, such words as improvement, achievement, and success have no meaning.” ~ Benjamin Franklin
Expansion can be scary, but the rewards can be great. Be prepared for challenges and setbacks, but let your enthusiasm keep driving you forward.
