Once a business is up and running, and things seem to be going well, people often wonder whether they should grow and expand their business. Anita Campbell has a good small post about Knowing When It’s Time To Expand, although she says “I wish there were a magic answer. If there is one, I don’t know anyone who’s found it yet.” She does though, think that planning may help the decision.
I am absolutely certain that planning can help the decision. Putting together a financial picture of where your company is today, and then using that to forecast different growth scenarios, will give you the best crystal ball available. You can see what happens if you double your current revenue, vs. if you only increase by 10%. You can see what capital you will require, and ultimately the $$ you are putting on the table in order to expand.
Recently one of my favorite restaurants in Eugene expanded by adding three more locations. One is a sister restaurant, bigger, fancier, and very expensive to open and operate. The 2 others were small spin-offs that were supposed to be the fast, “to go” option. I have eaten at all 3 new locations, and unfortunately, they leave a lot to be desired. I can’t help but think that they didn’t actually do an expansion plan because they seem to be reeling, and having a very hard time running these new locations. In fact, I know things can’t be going well at the other locations because the food is just, well, bad. Their first location is the restaurant it is today BECAUSE of the excellent and innovative food.
It scares me that these new locations will take the older, more established, delicious, best restaurant in Eugene, down with them. I wish that I knew with certainty that they actually did take the steps to do an expansion plan, as that would mean they understood the financial picture, and had enough money and information to survive some bad times. But alas, with the poor implementation of the new locations, I just fear that they did not.
So if things are going great for your business, and you are thinking about expanding and growing — go for it! But do your homework and get your financial forecasts done with several what-if scenarios. That way you will understand what it takes and you will have back-up plans if things don’t go as well as you initially planned.
-Sabrina Parsons, aka, Mommy Ceo
Sabrina has served as CEO of Palo Alto Software since 2007.
