Taking the leap: your company’s expansion strategy - The Finance Team

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Taking the leap: your company’s expansion strategy

At first, your business was a struggling start-up. Cash flow was tight and paying the bills every month was a balancing act. But hard work and perseverance paid off, and after a while, money began to flow in steadily. You’ve become established in your market. Demand has continued to grow. All the signs are pointing towards one thing: it’s time to expand.

The decision to expand your business is a potential game-changer. After all, every company that enjoys widespread success today went through the same process. For example, it was that decision which saw Ouma’s rusks go from a small, home-spun business in Molteno, Eastern Cape to the household brand it is today. The same decision was once faced by international brands such as Apple computers and McDonald’s fast food chain as well. It’s important, then, that some careful thought goes into developing an expansion strategy for your business before you take the plunge.

Now that you’ve identified that the business needs to grow, your expansion strategy should outline how and why. Indeed, your expansion strategy should be based on one of several options that outline the way in which the company plans to get more business. Here are some options to be aware of when drawing up that plan.

  1.  Diversification. So your customers love your gluten-free chocolate chip cookies? How about adding another flavour of cookie to the mix? Or consider making gluten-free muffins as well? The starting point here is to conduct research to determine what your clients or customers want. Once the opportunity area has been identified, your expansion strategy should outline how you will ensure the new product is the same or even better quality than your existing products. You will need the input of experts to help plan and execute this.
  2. Target new markets. Let’s assume you run a real estate business that specializes in the selling of low- to mid-level cost houses. Because of this, you’ve traditionally targeted first-time home owners. Your expansion strategy could outline a second, alternate market for your product. What about targeting empty-nesters who are looking to scale down at the end of their careers? What about marketing to 60-somethings who are contemplating their living options for retirement? Determine how you will speak differently to the new market, and what unique selling proposition you will outline for them.
  3. Consider a joint venture or partnership. Your expansion strategy could outline the possibilities of a new synergy. Your new partner should have strengths that your company lacks in order to progress the business beyond where it could go on its own. For example, if your business’s strength is its efficiency, look for a company that has strong customer relations. If you’ve got a strong product range, look for a partner that has a well-established distribution network.

Decide whether this partnership will be for a limited time and purpose (a limited edition offering, for example, that allows you to reach new customers), or whether it will form the new face of your business from hereon in.

4. Get your finances in order. Whether you decide to take one of these options or another one entirely, business pundits agree on one piece of advice: a set of prepared financial documents should form the basis of your expansion strategy. In order to grow, you’re going to need money, and typically, you will need some from a lending institution such as a bank. Before the bank outlays anything, it will want to see the health of your cash flow, and your company’s ability to contribute to the cash injection it will need to expand. The health of your finances will often determine the extent of the capital you are able to attract for your expansion venture.

If your company has taken the decision to expand, and you are looking for assistance in preparing financials as a basis for your expansion strategy, The Finance Team can provide a solution. A suitable finance executive from our team of qualified professionals will be able to assist your company in preparing a set of financials that will attract the financing you need to turn your dreams for growth into a reality.

Image credit: http://beekn.net/

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