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5 signs your business is ready for expansion

The 5 best indicators that your business is achieving the necessary goals to be prepared to expand. 

Good news, if you’re reading this article with your business in mind then you’ve already taken the difficult first step of establishing a shopfront and engaging with your customer base. Your stock or services are turning over and you feel the future outlook of your business is bright.

This is quite the achievement in and of itself, but now you may be wondering if expansion on the horizon for your business? Whether it’s a new store, a venture into a different city, or an increase in your workforce, here’s how to know if you’re ready to take the leap. 

1. You make a (healthy) profit

A key indicator for expansion in your business is a profitable and well-kept account balance. This requires looking at your net income and your cash flow statement.

Look to see if all overhead costs are accounted for with your earnings: wages and rent are paid, supplier bills are up to date and the electricity is still running. Using an invoice financing facility, such as invoice factoring or invoice discounting, through Earlypay can be a useful tool in this regard. Invoice financing for your small business can get your invoices paid when you need the cash, improving your cash flow.

If the account is in the black then the future is looking bright for expansion. You currently have a profitable business and may potentially have the cash required to make the next step with minimal or no outside investment. Even if investment is necessary, or desirable, a healthy profit makes your business look as attractive as possible. 

2. You have regular customers

So, you’re making a healthy profit, but how sustainable are you? One big job may keep a shop running over the short term, but regular customers bringing in consistent streams of revenue, are the key to long-term sustainability for your company. If you’re turning over good profits month-on-month then it’s reasonable to imagine positive long-term performance moving into the future.

One of the best indicators that now’s the time to think expansion is if you have more demand for your business than you can currently cater to. This is especially true if these are regular customers coming back, demonstrating a strong sense of satisfaction in your product. If they want more than you can currently provide, then it’s quite possible you’re ready to make a move. 

3. The market is growing 

Business owners still have to think of the big picture at all times. Some markets are niche or localised to a particular area. Having one successful shopfront doesn’t necessarily mean that there is room for you to double down. 

A useful exercise to go through is to take stock of the industry you’re in as a whole. Are there increasingly more new businesses popping up in your field? Are there any reports on the growth of the industry within your current area or others that you might be looking to break into?

Having confidence that you’re in a growth industry is a massive boost to your expansion hopes. It means there is still ground to capture and you’re well positioned to strike. 

4. Due diligence done

Doing the legwork usually pays off in the long run. If you’re thinking of expansion, it’s important to put pen to paper and start working out the logistics. Where exactly might you be considering going? 

Work out the rent for similar spaces to what you believe you’ll need, in areas that you’re looking to break into. Calculate how many staff will be required to ensure it runs properly and what their wages will be. Think about any additional supplies required, or any third party contractors you may need.

The more information you have in terms of how exactly you would execute your expansion plans, and how much it will cost, the more successful you’re likely to be. The devil is in the detail. 

5. You’re sleek and efficient

Now is the time to get somewhat technical. There are a few key financial ratios that measure how well your business uses the things it has at its disposal. These can include the people you employ, assets you own, or debt that you incur. 

One such ratio is Return on Capital Employed (ROCE). Either in-house or third party accountancy can measure this for you and a higher ROCE value gives confidence in any further capital investment you make.

Put simply, these tools reassure you and any investors that further spending will likely be used well, or that further debt can be sustained to allow your business to expand.

Confidence is key when considering if your business is ready for expansion. Hopefully, by exploring the 5 points above you will have a better sense of the position that your business is in, and more confidence in your plans. With the right moves you, and your business, can flourish going into the future.

Do you think that invoice financing could benefit your business? Call our helpful team on 1300 760 205 today or email us at hello@earlypay.com.au