If you are currently running a small business where you can see the opportunity to expand and reach new markets, it can be difficult to decide whether or not the risk involved in doing this is worth it for the returns you can potentially get.
What most people want to know when they are in this situation is how much expansion will cost, and whether or not that money is going to be a good investment.
Predicting how well a new expansion will go is difficult. Bringing in new products or launching in new markets can be something that can often defy even the best-laid plans and expectations. What you can at least do, however, is know what your costs will be and how you will meet them, so you can analyse how effective your expansion has been when you’ve done it or decide whether or not the investment is worth it before you do.
Work Out Your Overheads
The best thing to do when working out whether or not it is a good idea to go ahead with an expansion plan is to look at how much it will cost to set up the infrastructure you need. If you need to open a new office, hire more people, or bring in new technology, for example, you should be able to get good ballpark figures for how much it will cost and include these in your budget for your venture.
When you are at this stage of your budgeting, be sure to cover everything. Will growing your business mean you have to change the cost of hosting your website, for example, or will you need to start using other third-party services that you have not been using to date, such as an accountant? These are all things that you should consider and factor in, as when a business grows you as a business owner will undoubtedly find yourself unable to cover all of the things that you currently do and may need to outsource some of your running overheads.
Look into The Cost of Suitable Loans
If you are planning to take out a personal or business loan to help you with the costs of expanding, then bear in mind that the monthly repayments on that loan will form a part of your budget too. Look at the loan products available from websites like Everyday Loans who have 41 branches in the UK and be sure to get a good feel for the kind of products that might be available to you, and how much of a cost they will add to your monthly budget should you take out a loan for the amount you think you are going to need.
Work Out Your New Marketing Strategy
As well as the cost of actually implementing and running your expansion, you will also need to think about how you will recoup that money by promoting your business into new markets. This will require a detailed marketing strategy, which should work in line with current strategies you are using. You probably already have quite a lot of data about what kind of marketing has worked for you up until now, and so you should be able to get an idea of what kind of marketing you would like to plan in and the cost of it. Marketing will be one of your biggest expenses in most cases, so this is certainly a major part of looking at what your expansion budget should be.
Add Contingency to Your Budget
As with setting any other kind of budget, you should always add a decent percentage on top as a contingency, in case there are expenses involved in the plan you have for expanding that you cannot currently foresee.
Contingency is the best way to mitigate risk, and if you are planning to take out a loan or get any other kind of financial input to help you with your expansion, then it is best to be sure that you are asking for an amount of money that will cover not only the bare essentials that you know you will have to pay for but also currently unknown things you need to complete what you want to do.
The exact steps involved in finding out how much it will cost for you to expand, and how much risk is involved in making that expansion financially, will differ depending on the type of business you have and how much information you already have about the market you want to grow into. As with any other thing in business, the more data you have the better, so be sure to do plenty of market research when you can. Other than that, these stages will help you get a rough budget that includes plenty of contingency and should help you get a feel for whether or not it is a good idea to go ahead with what you are considering.