A: Every business goes through a growth spurt and whether it's a multi-national corporation or an entrepreneurial enterprise, expansion is a tough process to navigate.

The real danger for any expanding business is that it does so too quickly or in an uncontrolled way. When this happens, cash flow and customer satisfaction are usually the first casualties and, in extreme circumstances, negative cash flow and dissatisfied customers can result in the demise of a previously-flourishing concern. The trick, then, lies in managing the growth process in order to reap the benefits in both the medium- and long-term. There are important things to bear in mind and some pitfalls to avoid in order to manage the process optimally.

Plan Your Expansion

It may seem self-evident that any entrepreneur undertaking a business expansion would do so in a planned way. The truth is that many businesses expand in reaction to circumstances and don't draw up a solid expansion plan.

During the planning phase, ask yourself:

• What is the real demand for our products or services at present?
• What is the projected demand for our products or services over the next two to five years?
• How big do we need to grow in order to meet that demand?
• How will changing competitor activity affect our business over the next two to five years?
• What should our excess capacity for unusual demands be?
• What are the steps needed in order to expand in a planned, profitable way?
• How many additional staff will be needed and when should they best be employed?
• What is the best way in which to phase the expansion so that cash flow isn't compromised?
• Where can we achieve economies of scale i.e. where will expanding capacity reduce our cost of sales?

Don't Over-Expand

Over-expansion is one of the most significant perils of a growth phase. As a rule of thumb, plan capacity based on a five-year projection of demand and allow an additional 10% of capacity over and above that for periods of heavy demand or for partial down-time in any part of your business.

Get Professional Financial Advice

There are financial implications for the business and it's always best to seek professional advice. It's important to speak to a financial institution that has experience in your business area. For plant and equipment, you may need to consider a flexible financing option, either a loan or a combination of a loan and an equity investment. Again, an institution with experience in the field and in your own industry is essential.

Develop a Project Management Schedule for the Expansion

When drawing up a project management schedule:

• Identify key deliverables.
• Attach dates to these deliverables.
• Identify key responsibilities.
• Set up a regular review schedule.
• Identify procedures for managing non-delivery on any part of the project.
• Build in appropriate timing and financial contingencies.

Keep Your Customers Informed

Expansion of any kind can cause disruptions in your day-to-day operations and it's important that your customers know what to expect. Before commencing an expansion, tell them what you're planning and what the expected completion date is. Make your customers aware of the fact that the expansion will ultimately benefit them and tell them how. Always reassure them that you have their interests at heart during the process.

Announce the Completion of Your Expansion

Once the expansion phase is complete, it's important to let both existing and potential customers know about it. Develop a special marketing offer to announce the occasion and send out media releases, especially to the local and regional press. Celebrate this moment in your business - it's one of the best marketing opportunities you could ask for.

Business Partners offers free initial consultations for viable entrepreneurial enterprises planning a business expansion. Contact a Business Partners Analyst to discuss the expansion of your business e-mail enquiries@businesspartners.co.za.