The 9 Hour Small Business Tune-Up
When Expanding It’s Important To Proceed With Caution
Now that you’ve completed the cost-cutting, outsourcing, and cash flow exercises in the last section, you’re ready to invest your newfound savings of time, energy, and money in areas that will benefit your business.
Expansion can be exciting for you and your customers. Everyone profits when it’s done correctly. (If you haven’t yet completed the exercises in Hour 7, do them now. You shouldn’t expand your business if these areas still need work.)
Many opportunities for expansion may already exist for your current product line. Analyze your product line and list other products and services that will accent it.
Your expansion should be related to your core business. If you sell auto parts you shouldn’t expand by selling jewelry, even if the jewelry is profitable. Selling such diverse products under one roof makes your customers feel as though they are at a yard sale. They will lose confidence in you.
Whether you’re expanding a product line or services, it would be a good idea to survey some of your customers to determine how they would react to the new expansion.
Let’s use an example from a business that has diminished in recent years. For example, I heard this story about Blockbuster, a once-popular video rental business. The new guy in charge had a background in merchandising and thought it would be a good idea to add popcorn, refreshments, chips, and dip, and a complete line of appetizers as well as T-shirts, mugs, gadgets, and a line of cool products for the “video crowd.”
The idea didn’t work and the result, a huge financial loss. What Could have been done is to ask the most important people about the idea, the customers. A simple customer survey could have been created.
For example, after surveying the Blockbuster customers, you may have discovered that their main interest is videos and they only come to the store for the new releases. Many of the customers had similar responses. Doing this research prior to expanding would have saved millions of dollars in unwanted T-shirts, mugs, and gadgets, it’s now all dead merchandise.
You would have learned that above all, your customers want new releases more quickly, so this is the area you should concentrate on. Know what your customers want, and find the best way to give it to them. Make that your top priority.
Here is a simple checklist to use when you are considering an expansion.
1. Is this expansion related to my core business?
2. Can I afford it?
3. Will this expansion jeopardize my existing business?
4. Will it be beneficial to my customers?
5. Will I have the time to make this expansion a success?
6. Do I have enough resources to complete it?
7. Do I want this expansion and do I have the patience to implement it properly?
Exercise: Expanding Your Business
a. List all the areas in which you can expand your business.
b. Choose the most appealing ideas from the above and write an implementation plan that includes a customer survey.
Now that you have completed the exercises, you should be able to see the possibilities of making expansions in your business. Remember to make sure the expansion is related to your business, that you’ll have the patience to implement it, and, most importantly, that it will benefit your customers.