Thinking of Expanding Your Business

Oct 15

Thinking of Expanding Your Business

Broadly speaking businesses expand for one of two main reasons. Either the business reacts to increasing market demand for their products or services, or the directors make a proactive decision to expand the business into new markets and territories to develop new partnerships. Often a business will expand as a result of both factors working in conjunction.

When to expand

The best time to expand your business is when the business is ready. A company should have a management accountant who is monitoring the business plan and comparing it with the real health of the business. It should become apparent to the accountant when expansion is needed to ensure that demand does not start to exceed the maximum possible supply.

An important reason to expand is for economies of scale. As a business grows larger, some parts of the business become relatively cheaper to operate and profit margins start to increase.

Outsourcing tasks when your business expands

Outsourcing has grown rapidly in popularity in the last decade and today many companies, both large and small, outsource some part of the business process to another company. Companies outsource to provide a better service for their clients and their own business needs. When a business expands, especially if expansion is rapid, outsourcing can become a necessity.

Outsourcing allows a business to hire specialist help without having the expense of taking on new staff. For instance, a small company may not have the budget to employ a marketing team, so it can make a lot of sense to outsource a marketing and PR agency.

Tax specialists

Some parts of a business are more naturally outsourced. For entrepreneurs and very small businesses it is beneficial to outsource the company finance to an accountant, or a firm of accountants. One of the main reasons for outsourcing the accounts is to gain expert knowledge on company taxation. The tax office changes rules and regulations frequently and it is difficult to know the best way to set up a company. For example, currently entrepreneurs and contractors often use an umbrella company to manage all their finances. These companies essentially act as the payroll for a business, paying each employee a salary while taking care of the company books. This can be a very efficient way for a small business to operate.

Another task that can be successfully outsourced for a small business is a secretarial role. It is not required nowadays to have a secretary on site; virtual secretaries are able to take phone calls, manage a calendar and reply to email enquiries. These vital services give managers more time to grow the business and also add an immediate personal touch.

Expanding a business successfully

Expanding a business successfully requires good planning. Planning for an expansion should always be a smoother and less stressful experience than a sudden and unexpected growth in sales forcing expansion to meet demand.

There are many risks when expanding a business. As a company grows its liabilities also grow. An unexpected reduction in turnover can quickly start to cause problems in larger companies, as a larger company is often less flexible and is less able to act quickly to respond to changing events. Again, this is where outsourcing can really benefit a business, as although contracts will be formed with outsourcing agencies, it should always be cheaper, and easier, to negotiate new terms with an agency than it is to manage a large workforce.