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Expanding Your Business
Business expansion can mean various things. You can increase the product line of your business, enlarge your physical plant, take on new employees, start a second location, move from a home office to a storefront, sell franchises, move into the global marketplace, or grow in any number of ways.
What do these different forms of expansion have in common? They all involve risk. Before you make the decision to expand, it is important to have a clear understanding of your financial picture and your industry. In other words, you need a good strategic expansion plan that analyzes all the issues and risks involved in the potential expansion and how those will be addressed.
Some of the issues to consider include:
- The results of your strategic plan and its relationship to your overall goals.
- Your financial situation and industry trends.
- External factors such as the economy.
- The strength of your management team and other human resources.
Plan for expansion well in advance. It is advantageous to get professional help--check with your banker, realtor, developer, lawyer, marketing expert, and other consultants as needed for the specific situation.
There are a number of ways to finance an expansion.
- Family, Friends and Relatives. This can be a good source of funding but approach it in a business fashion. Have an attorney draw up papers for the loan agreement.
- Certified Development Companies (CDCs). These are companies that make government-guaranteed loans to businesses for specific purposes.
- Small Business Investment Companies (SBICs). Look to local sources such as a Small Business Development Center for information about this type of loan.
- Small Business Administration (SBA). The SBA loan guarantee program to help entrepreneurs obtain financing from commercial lenders.
- Venture Capital Markets
- Initial Public Offerings (IPOs). Public stock offerings are complex and costly so seek advice on the viability of this option.
- Small Corporate Offering Registration (SCOR). This option allows a company to raise up to $1 million by selling common stock directly to the public.
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