Starting a business is a bold endeavor, one that few undertake. And when that business flourishes, deciding whether to expand can feel like an equally daunting leap. That’s why out of nearly 40 million SMEs in Nigeria, only a few manage to do it, even though over 50% of them plan local expansion.
Why the disparity?
The answer lies in striking the right balance. On one hand, entrepreneurs can become so entrenched in the day-to-day operations of their business that recognizing the signs of readiness for expansion becomes difficult. Conversely, premature expansion can put undue strain on the organization. To avoid falling into either trap, it's crucial to recognize the telltale signs that your business is primed for its next phase of growth.
Signs your business is ready to expand
We have outlined eight signs that tell if your business is ready for that next phase. So, get your pen and notebook and start ticking these points off your checklist.
You have more business than you can handle
Having way too much demand is arguably the most obvious sign that you need to expand. But don’t be in a hurry. You must be sure that you’re consistently having overwhelming sales, and that your current capacity is too small to handle it. Track the numbers, because having a crazy-good month doesn't mean things will always be busy. Maybe it was just the holidays or a special event. Be certain. Use a POS system with analytics to track your monthly sales history. You want to see steady, high sales before you jump into expanding.
A unified, skilled team
Your employees are the backbone of your business. If you envision your future with your current core staff by your side, and they share your enthusiasm for growth, you have a vital component in place. However, if there's a mismatch, expansion plans should take a backseat to strategic hiring and skills development. According to Philips Consulting, less than 25% of Nigerian employers are highly comfortable with their employees' skill sets. Make sure you're one of them and every team member is on the same page regarding where the company is going. You need the right team first! ResearchGate highlights the importance of employee retention strategies in the face of Nigeria's high turnover rates among SME employees.
Physical Space Constraints
Sometimes, the signs are literal: if your staff is bursting at the seams, it may be time to explore larger facilities that can accommodate your growing team and operations. Universalfunding highlights that expanding businesses often experience cash flow problems; ensure you have the financial resources to support a move to new premises.
A clear roadmap for expansion
Ambition is important, but without a well-defined plan, growth becomes aimless. Critical considerations include identifying potential partners, securing necessary facilities, staffing strategies, and a launch plan tailored to your new market or offerings. Startup Grind emphasizes the importance of market research in gauging the number and power of potential competitors and making informed decisions about expansion. Don’t forget to use market research to identify geographic regions for expansion and new market opportunities.
You’re hitting your targets
Having a plan is great, but are you hitting your targets? If you're smashing your goals or even ahead of schedule, maybe you can move faster with your expansion plans. But if you keep falling short, it's time to re-think your approach. Don't ditch the dream, but adjust your timeline or strategy.
You have enough cash
Do you have the cash for expansion? Even if things look good on paper, are customers paying on time, and do you have enough leftover money (cash flow) to cover the costs?
Your customers need you in more places
Are customers asking for your products in stores, or telling you they wish you were closer? This "word-of-mouth" means there's customer demand for you to expand production or open new locations.
A favourably industry landscape
Understanding your competitive environment is vital. Low competition and an untapped customer base within your industry create fertile ground for successful expansion. USAID notes that Nigeria's economic potential is constrained by many structural issues, including inadequate infrastructure and trade barriers. Ensure you have a deep understanding of the challenges and opportunities within your specific industry.
Logistics: The Backbone of Successful Expansion
If these signs point to your readiness for local expansion, remember that efficient logistics are the linchpin of success. As Africa's leading logistics provider, DHL can help you navigate the complexities of reaching new markets across Nigeria and beyond. Our expansive network, experienced professionals, and cutting-edge technology solutions streamline operations and provide real-time visibility into your shipments.
Infosys BPM highlights how success in logistics translates to increased efficiencies, reduced costs, enhanced production rates, improved inventory management, and better customer satisfaction. Don't let logistics become a barrier to your growth ambitions. Open a business account with DHL today and position your SME for successful expansion.
