Choosing right time to expand business
San Francisco Business Times
Problem: With good cash flow, a solid customer base and an optimistic profit picture, you are anxious to grow and spread out. Dreams of becoming tomorrow's Blockbuster Video are dancing in your head. But how do you take the next step?
Diagnosis: Don't do anything impulsive. If you have attained at least a 20 percent market share, it may be time to spread out. But if not, you'd probably be well advised not to take anything on.
Success in one venture does not mean that you're invincible. Business is like a crap-shoot: You can have a winner on the first roll -- and snake-eyes on the next.
Prescription: Don't make unilateral decisions. Consult your advisers. Listen to a variety of views and gather as much information as possible before you decide on a course of action.
In general terms, there are four ways you can go:
1. Business as usual. Keep doing what you've been doing, but increase the business gradually by consistently adding customers. This may not be the most dramatic decision, but it's certianly one of the safest.
2. Strive to dominate your market over the long haul. Instead of adding more customers, deepen your relationships with customers you already have. Stress quality, customer service and new products. Make your company indispensable to its customers.
This is an excellent tactic if your customers are in growth mode, as you'll grow right along with them. But if they are declining, they will still take you right along with them.
3. Restructure your business to allow for easy expansion during good times and easy contraction during slow downs. There are a number of ways to do this. One is to out-source almost everything. That will make your company lean and mean -- consisting of a small core of key employees, rather than a work force that is constantly expanding.
4. Take on more "partners." Spin off parts of the company, forming subsidiaries; set up joint ventures with other companies (both customers and suppliers are likely business partners); create other partnerships.
These tactics help you to spread the risk of further expansion. They also distribute the headaches of management -- specifically, trying to take on too much at one time.
Small Business Troubleshooter is written by speaker and consultant Roger Fritz, author of 27 business and management books. Fax inquiries to Roger Fritz c/o San Francisco Business Times, (415) 398-1895, or e-mail them to sfbt@crl.com, or call (708) 420-7673.
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