It’s no secret that small businesses are the heartbeat of our economy. In fact, according to the Small Business Administration, 99.9% of American businesses are small and account for the majority of job creation in the United States.  

While it may be tempting for business owners to take the next step and grow their company, it’s all about timing and having the right direction to achieve sustainable, long-term growth.

“Business owners should master the art of timing when it comes to expansion if they want to unlock long-term, sustainable growth. Jumping the gun or moving too slowly can result in missed opportunities or stretching resources too thin. While business expansion is always a gamble, it’s important to find the sweet spot where risk meets reward,” said Kyle Sickman, Executive Vice President at FirstBank.

Here are eight signs your business is ready to expand. 

1. You have a plan for future business growth.

The growth of a business should be planned, intentional, and realistic to ensure successful expansion. By creating growth plans, business owners can hone in on their business goals and focus on what they need to do to meet those objectives. No business has an unlimited amount of time and money, so planning is especially important when it comes to allocating resources to meet the right priorities. Sometimes it can be beneficial to work with a business or financial advisor on plans to help prevent leaving important decisions up to chance.

2. Your business is outgrowing its current space.

If your business growth plan has a second or third brick-and-mortar on the list, seeking financing options like a Commercial Real Estate (CRE) or an Owner-Occupied Commercial Real Estate (OOCRE) loan may be a solution. OOCRE loans can sometimes provide business owners with unused space, which can be leased to third-party tenants, helping generate rental income or it can help them enhance the customer experience. For example, a manufacturing company that builds and designs customized doors can rent out extra warehouse space to a similar business that needs more room, access to loading docks or storage.

3. You have a reliable team.

Taking on the daily responsibilities and managing the expansion of a business is a lot for anyone to handle on their own. Once you have a dependable team managing daily operations, you should feel more confident to expand and dedicate your focus on strategic growth

4. Demand outweighs supply.

A business’s trajectory is closely tied to its supply and demand. When demand for a product or service rises, it fuels expansion and indicates the offerings hold significant value for its customers. It also suggests the business is well positioned for growth. If your product consistently sells out before you restock or your services are often overbooked/have waitlists, that may be a good indication it’s time to increase workers or resources to meet demand.

5. Your business has healthy cash flow.

Consistent positive cash flow can suggest a business is ready for expansion. For one, healthy cash flow and savings can provide a safety net for unexpected costs, investment or growth opportunities. If you need financing, showing strong cash flow and a low debt-to-equity ratio can go a long way in making your case with a lender.

6. Your business is profitable.

You should also ask yourself if your business is profitable with its current sales and infrastructure. Despite rising costs, consistent and increased profit margins suggest your business is operating efficiently and is ready to scale. Lenders and investors are also more willing to take risks, invest and work with financially profitable and reputable businesses. 

7. There are untapped opportunities in your area/industry.

You should stay up-to-date on industry trends and area demographics to keep a pulse on what your target audience is interested in. For instance, Shi (Ben) Ke, a Colorado restauranteur and business owner, is an excellent example of knowing your industry and adapting to trends. Ben now owns a conglomerate of local concepts from Slammin’ Chicken to Asuka Ramen and Poke and Sizzling Hibachi. He recognized Colorado’s growing population, evolving food scene and subsequent demand for trending food concepts like hot chicken sandwiches and build-your-own poke or ramen bowls, especially in high-traffic areas, including Denver, Lakewood, and Englewood. Instead of focusing solely on one project, he opened several fast-casual hot spots. With FirstBank’s help, Ben was able to finance multiple owner-occupied restaurants to help grow his concepts and build equity in his business.

8. Your business is ready to merge.

If you notice demand is outpacing supply and your industry is on an upswing, one alternative you can consider is merging with or acquiring businesses that provide the same or similar services. It’s important to note that mergers and acquisitions are most successful when the company has a long history of financial stability, a strong management team in place and there’s good synergy between both companies. You should always seek financial guidance to ensure your business is set up for success before and after the transition.

Once you’ve made your decision, financing may be the next hurdle. Some banks offer business acquisition loans to help finance the purchase of a business. To learn more, check out “5 Tips for Finding and Buying a Profitable Business” at efirstbankblog.com.

Keep an eye on the horizon.

When business owners feel ready to expand, there are many things they should consider taking their business to the next level. Whether it’s finding a reliable business consultant or banking partner, business expansion shouldn’t be a pipe dream.

For more helpful business tips and resources, check out efirstbank.com/goodbusiness or our Business Success page at efirstbankblog.com.

FirstBank determines actual loan qualification only after receipt of a complete loan application and analysis of pertinent information, such as (but not limited to) credit history, income documentation, and property valuation.  Subject to approval.  Fees and restrictions may apply.  See any FirstBank location for complete details.

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