You are feeling pretty good. That infant you gave birth to is actually generating a profit, and you are finally finding a little bit of time to enjoy some of those leisure activities that you gave up a few years ago. The thought of expansion has certainly crossed your mind, but of course that would mean finding some investors. And finding some investors may mean giving up a bit of control.
Then there are the risks involved. Lots of other companies moved to expand and went “belly-up.” On the other hand, moving to the next level is what you’ve always dreamed about. You have a lot of “gut” feelings, but “gut” is not how this decision should be made. There are some very telltale signs that you are ready to expand your business – here’s 8 of them.
#1. You are No Longer Working In the Business – You are Working On the Business
This is a pretty important sign. It means that your business model is working, that your systems are working, and that your team is self-sufficient. These are all really important factors. If you are becoming more and more an observer and only a “consultant” when bigger problems arise and your input is needed, you have planned and lead well.
What a great place to be. You will have the time, if you choose expansion, to devote to all of the “growing pains” that are inevitable.
#2. Revenue has Exceeded Costs for a Number of Months
You haven’t just had one good month, you’ve had several, and the revenue has been climbing steadily each month since you first realized a profit. Moreover, all customers are now paying full price, and the profit margins are close to 50%. All of these signals are positive, and they are all things that potential investors will look at carefully as they make their decisions.
#3. Customers are Coming to You in Steadily Increasing Numbers
Remember all of the hard work it was to pull in those first potentials and convert them? You were offering discounts, free trials – anything to just get them in the door. You are not doing that anymore, and new customers are increasing. You’ve done the analysis of the sources for these new customers, and have determined the following:
- Your current customers are referring others to you
- Your current marketing strategy has taken hold and is beginning to drive traffic to you.
You and your brand are obviously establishing a reputation for quality and service.
#4. You Have Achieved Your Initial Goals
When you launched you did so with a pretty solid business plan and some definite goals – for quality, for service, and for revenue. These goals have been met and exceeded, and it is time to set new ones. You are poised for this expansion should you decide to make that your next step. You have discussed going to the next level with your team, and they are enthusiastic and excited about the prospect.
#5. You Have the Right Team in Place
One of the elements you will look at is your team and its commitment. Are your staff members really qualified? Are they growing in skill levels as your company has grown? Do they have an emotional connection to you and to the company? When two companies look relatively equal, it is the team members who can make the difference between mediocrity and greatness. Part of the investors’ “research” will be looking into the competition that is “out there” and how well your team executes compared to the others.
#6. You Have a Plan that is Realistic on Breadth and Depth of Growth
You have to define exactly what your expansion will look like. Are you adding to a product line? Are you expanding geographically into new markets? If so, where is the research on the competition and the level of need in those markets? Are you adding additional services and, if so, where is the research to show there is a need?
When you make the decision to scale, you will be virtually writing a new business plan. Of course, it will be easier in some ways and more difficult in others. Your initial plan was primarily for your own use; this one is to be presented to investors. Much more detail and background research will be required. On the other hand you have much more experience in this business niche now, so many of the issues you struggled with when you developed your initial plan are non-issues now. You are much more the expert than you were back then.
#7. You are Willing to Return to a Lifestyle of Working In the Business Again
You have begun to enjoy that leisure time again. Are you passionate enough and committed enough to jump back in again? Before your expansion is “settled” in, you could be looking at 1-2 years of being in the trenches once again. Be certain that you are ready to pull that “double-duty” again. A regretful or resentful leader will kill a business. You have to realize that for this time your business will have to go first, it literally will be a toddler!
#8. You Have the Cash
Well, you may not have the cash at the moment, but you of course will not consider an expansion without it. To get the investor(s) you need, you must be willing to do the research it takes to find the types of investors you want. As they saying goes, you may have to “kiss a lot of toads to find your prince.” Negotiations with potential investors are delicate and do carry risk. You need to get a feel for the level of “management” they want to assume and be sure that you can handle it.
Many founders have regretted the impulsivity of jumping on the first investment offer only to find that the investor wanted to “micro-manage” the operations. It takes a lot of effort to locate a new investor who is willing to put up the money to buy the “micro-manager” out. These things need to be discussed openly and up front.
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