Your business has been up and running for a few years now, profits are steady and you’re looking for ways to grow. Are profits alone reason enough to consider expansion? There are as many reasons to expand your business as there are ways to expand it. In the end, why and how you approach expanding your small business may involve more factors than just your bottom line and the only wrong decision is taking your business in a direction you don’t really want it to go.

Signs Your Business is Ready to Expand

• Your business shows consistent profits that have continued to increase or hold steady over the past three to five years.
• Cash flow provides you with a strong source of capital that you’re able to invest back into business, thus limiting or eliminating any need for business expansion loans.
• You’ve captured and retained approximately 20 percent or more of your target market and have established a loyal customer base.
• You’re in an industry that’s holding or gaining consumer interest.
• A franchise, product licensing or other partnership opportunity has come up that has the potential to extend your brand and penetrate new markets.

Undercapitalization remains one of the top reasons why businesses fail and it’s not limited to the start up phase. If profits are inconsistent and cash flow is a challenge, relying on self-financing alone may weaken your business instead of strengthening it. Review your finances carefully and explore all of your business expansion loan options before you make a financing decision.

The backbone of most small businesses is repeat customers. Have you reached your target number of customers? Are they asking for more or different products and services? If your business is dependent upon only a few customers who do business with you often, will expanding your business improve those relationships, pave the way for new customer relationships or both? In other words, you need to be sure there’s more business to be had and you haven’t tapped out your market.

Expanding a business is a logical choice if you’re working in an industry where consumer interest is high and you’re keeping pace with your industry’s technology. However, if new technology is slowly making your business obsolete and you aren’t planning to phase out the old to make room for the new, you shouldn’t be thinking about expansion. Neither should you consider expanding while your industry’s experiencing a temporary downturn. Wait for the upswing before moving forward with your expansion plans.

Franchising, licensing and partnerships are other ways of expanding your small business, but be prepared to give up some control over your brand and distribution and to share trade secrets and other institutional knowledge. The terms of these agreements will vary from case to case and you’ll need to understand the deal in front of you and know how to negotiate for what you want.

Signs You’re Ready to Expand Your Business

• You thrived on the adrenaline rush from starting your business.
• You’ve got a strong team of employees whose skills, talents and abilities align with your objectives for expanding the business or know where to find them
• You’re ready to play a more strategic, less hands-on role in your business
• You’ve drafted a business expansion plan that outlines your goals and strategies for managing any growing pains

Small business expansion can require as much time, effort and focused dedication as the start up phase. If you loved the adrenaline rush of starting your business, you’ll probably thrive during its expansion, but be sure you’re up for that challenge again and you’re not just romanticizing those halcyon startup days.

If you’ve got a strong team of employees and you can leverage their skills and abilities to grow your business, you’ll have the resources you need to expand. If you don’t have a strong team in place, you’ll need to recruit them before you expand, unless your business is truly a one-person operation.

As your business expands, you’ll have increased responsibilities that tend more toward the strategic and managerial than tactical. If delegating isn’t your strong suit, expanding your business in ways that require adding layers of staff between you and customers may not be the best way to grow your business. On the other hand, if you’re anxious to relieve yourself of the daily operations that get in the way of developing and implementing new strategies, you’re probably poised to take your business to the next level.

Finally, the best way to ensure you—and not just your business—are ready to expand is to draft a business expansion plan. If you’ve been reviewing and revising your original business plan on a regular basis, you’ve already got the pieces in place to plan for growth. Be sure to include best and worst case scenarios and outline the steps you’ll need to take to manage the growing pains that come with expanding a small business