When to Expand Your Small Business

There’s not one single answer to the question of when to expand a business. Before you make the decision to grow, determine if your business is set up for success. Here’s more information about business expansion along with ways to tell if you are ready to start business growth and strategies to kick it off.

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What is business expansion?

Business expansion is a stage where a business seeks out additional options to generate more profit. Different forms of business expansion include opening in another location, adding sales employees, increased marketing, adding franchisees, offering new products or services, entering new markets, expanding globally, and expanding through ecommerce.

Pros and cons of business expansion

You may be excited and ready to launch business expansion strategies. However, it’s a good idea to look at the advantages and disadvantages and consider the impact on your unique business.

Advantages of business growth

One of the strongest benefits to business growth is the ability to take advantage of the economies of scale. In other words, as you increase production output, you can bring down costs by buying in bulk. Business growth can also enable you to:

  • Increase resources and inventory
  • Generate increased sales and profits
  • Reach new customers or markets
  • Put more money back into further business growth

Expanding your business can also give an impression of greater financial viability and stability, allowing you to secure low cost funds or partnerships when they will be most effective.

Disadvantages of business growth

Larger businesses are generally more complex than smaller enterprises. Common disadvantages of business expansions are:

  • Cash shortages - you may need to borrow money to meet costs like new equipment
  • Compromised quality - increasing your production output may lead to a decline in quality, which can lead to loss of revenue
  • Loss of control - as your business grows, you may need to delegate management duties or divide the workloads between different locations

Increased working capital requirements caused by hiring, moving to a larger space, or increased equipment needs.

Putting business growth strategies in place can be disruptive and put pressure on your staff, resources, and finances. Plan carefully and prepare a business plan for growth to help anticipate and avoid issues down the road.

When should a business be expanded?

“When” is just as important as “how” when it comes to business expansion. Here are signs that expansion might be the right move.

Loyal customers

Do you have engaged and loyal customers? This indicates a demand for your products or services. Be sure to request and pay attention to customer reviews to gauge the popularity of your business and customer satisfaction with your operations.

Customers ask for growth

Are you attracting consumers from far away? Do you ship to distant locations? This could indicate that there are strong new markets you can explore.

You’ve had 3+ years of profits

Steady profit growth is a better indication to expand than just looking at a recent spike in sales that could be because of seasonality or temporary demand.

Your team is strong

Communication is key. Your staff will need to be able to put new systems and processes in place to handle new challenges. Work hard to retain valuable employees and attract seasoned new workers to take charge of a business uptick.


Your industry is expanding

Products or services in growing demand are another indication that the time may be ripe for business expansion. Perform an in-depth competitive analysis to determine how your competitors are selling in the current market and identify opportunities for your business.

Your cash flow is positive and steady

If sales are steady but you’re not getting paid on time or managing your cash flow well, you won’t have the strong foundation you need to fund business expansion. A best practice is to work with a financial professional and determine how to handle the costs of expansion without sinking your business. If you need outside funding, strive for the correct amount to reach your goals with low rates and long terms that won’t cut into cash flow. Review information about Bank Term loans and low-cost SBA 7(a) loans on the SmartBiz Loans website.

You’re turning away business

Are you too busy to capitalize on leads and sales in a timely fashion? Are you and your staff overworked? If it’s not a time management problem but instead it’s customer demand, the time might be right to expand.

There’s a need for related products or services

If sales of your primary product or service are strong, explore complimentary offerings. If you sell luxury food items, adding table décor might be a fit. If you have a fitness studio, bringing in exercise equipment or clothing could be an easy way to add related products.

Systems are in place

Your business should be running like a well-oiled machine before you consider expansion. Audit your operations and streamline where necessary.

You’re running short on room

If you’ve been operating a business from home successfully, it might start to get a little crowded. Seeking a larger space can help your business run smoother with less stress on resources and employees.

How to expand a business successfully

Here are solid strategies to explore when planning a business expansion.

Add new products or services

Off-Road Vixens is a SmartBiz Loans customer. They identified additional products that influencers and customers are interested in. By adding these items, they were able to expand sales at trade shows and consumer events.

Bristly, another SmartBiz Loans customer, started out offering products to combat canine dental disease. With funding from a bank in the SmartBiz network, they are adding food and pet accessory products.

Optimize your sales

Use proven strategies to reach new and potential customers. Tactics can include improving your follow up and sale closures. The right software can help you organize and launch sales programs.

Claim a niche

The founder of SkateXS realized that skateboarding as a sport was increasing in popularity across the U.S. His business produces appropriately sized boards and safety equipment for kids. He’s managed to corner the market and bring down costs with the help of low-cost funds.

Move into new markets

Los Gatos Ballet & Pilates started as a dance instruction studio. After assessing the need for adult exercise in her Northern California location, she added Pilates, moving into the fitness market as well.

Seek referrals

Word-of-mouth marketing may be one of the most powerful forms of marketing there is and it’s important to get your customers talking about you and your business. People trust recommendations more than ever. Review our suggested strategies here: 10 Ideas to Get More Customer Referrals.

Launch an ecommerce website

If you want to make it in ecommerce, you will have to overcome a number of hurdles You may not have the budget to pour into expensive marketing campaigns or fancy shopping websites.

Partner with other businesses

Explore other businesses that have complimentary offerings. That might mean a yoga studio partnering with an exercise apparel company or a bakery working in tandem with a beauty salon. You can share the expenses of promotion, events, and advertising.

Business expansion success stories

Sam Kwon is a creative entrepreneur who founded Cosmital to help small and medium sized businesses thrive. His company offers subscription software products to a market historically underserved and overcharged for important technology solutions. Read how low-cost funding is helping him reach his business expansion goals: Cosmital Using Low-cost SBA Funds to Expand.

Final thoughts

Having a detailed business expansion plan in place can help launch your expansion efforts, indicating the right time for growth and the resources you’ll need. It can be intimidating to get started but this blog post from the SmartBiz Small Business Blog can help: The Ultimate Guide to Starting a Business Plan.