Expanding a business can be a daunting task, but it’s also an exciting one. It signifies growth, opportunity, and success. However, it’s important to determine if your business is ready for expansion before taking the plunge. Our own Director of Schools, Jade Fernandez, touched on this from an academic standpoint. In this blog, we’ll discuss how to know when it could be time to expand, but from a business position.
Some basic characteristics of a business (or in our case, a school) that might be in a strong position for expansion include:
1. Consistent profitability: The first indication that your business is ready to expand is consistent profitability. If your business has been profitable for at least two years, and you have enough capital to fund your expansion plans, it’s a good sign that your business is ready for expansion. It’s important to ensure that you have a good financial plan in place to ensure that you can sustain the expansion and remain profitable. At Method Schools, a non-profit entity, we consider “profitability” as operational solvency with a minimum of 10% placed into our rainy day fund annually. Granted, this isn’t a standard definition for profitability but for a non-profit with a unique mission and business model it makes sense for us.
2. Customer demand: Another crucial factor to consider is customer demand. If your business has a loyal customer base and you are struggling to meet their demand, then it may be time to expand. Conduct market research to determine if there is sufficient demand for your products or services in new markets. If there is, then it’s a sign that your business is ready for expansion. In our case, we’ve seen Method grow by more than 15% each year nine out of 10 years.
3. Efficient systems and processes: Before expanding, it’s important to have efficient systems and processes in place. If your current systems and processes are not efficient, expanding could lead to chaos and loss of control. Evaluate your current systems and processes and identify areas where improvement is needed. Streamline your operations to ensure that they are scalable and efficient before you expand.
4. Skilled and committed staff: Expanding a business requires a committed and skilled team. Ensure that your staff is trained and capable of handling the additional workload that comes with expansion. It’s important to have a strong management team in place to oversee the expansion and ensure that it runs smoothly.
5. Access to capital: Expanding a business requires capital. Before expanding, ensure that you have access to the necessary funds. You can obtain funding through loans, grants, or investors. It’s important to have a financial plan in place and to be prepared for unexpected expenses. In our situation, we’re faced with constraints that a typical for-profit business isn’t. We need to make sure the funds aren’t just available, but that they come from the right place.
6. Competitive advantage: Finally, it’s important to assess your competitive advantage before expanding. Evaluate your competition and identify what sets you apart from them. If you have a unique selling proposition, then expanding may be the right move. However, if your competition is already well-established in the market, expanding may not be the best decision.
Expanding a business can be a risky move. It’s important to ensure that your business is ready for expansion before taking the plunge. Evaluate your profitability, customer demand, systems and processes, staff, access to capital, and competitive advantage before making a decision. With proper planning and preparation, expansion can lead to long-term success and growth.