- Understanding when your startup has reached its tipping point, and what to do next
- For those who have started businesses and are thinking about expanding
- Understand the challenges that will inevitably come as your business scales
Once your company has established itself and gained a solid following, is it time to expand? Should you scale up if you start to experience rapid growth in sales? The choice can be a difficult one, but there are certain signs that it’s time for your startup to take the next step.
You’re confident in your current performance
Ambitious business owners might believe that their idea is scalable and be keen to expand as soon as possible, but you shouldn’t take this step until you’re confident that you have an effective business model.
You should be aware of your customer’s needs and expectations, and your company should have a strong cash flow with a reliable expectation of continued business health. Be cautious when scrutinizing your records, as you’ll want to make sure a boost in sales isn’t a temporary phenomenon.
You’re struggling to meet demand
At a certain point, you may find yourself routinely meeting or exceeding the goals you have set for your business. You may also have to turn away business opportunities to avoid overextending yourself.
Scaling up may also be necessary if the issues facing your company are too complex to solve with the team on hand. Bringing on hires with management or leadership experience may be necessary to oversee teams and transition your company to long-term strategic planning. Doing so gives up some of the flexibility that comes with smaller companies, but also prevents multitasking and reduced productivity among current team members.
You’ve planned ahead
Expanding a business can backfire, resulting in higher expenses and not enough demand to meet these costs. You’ll want to make sure you’ve reduced the risks as much as possible before taking the leap.
Update your financial plan to determine a sales growth forecast. You should also determine the expenses involved in the expansion, such as new hires, leases, equipment, and utilities. Comparing this information will let you know if you’ll be able to meet the initial costs of expansion and reach profitability in a reasonable timeframe.