LET us this week, look at existing businesses, and explore ways that you can expand and improve the business.
One way, and let’s face it, the Zambian way, is to go to the bank, and apply for a large loan to fund the expansion. Sometimes it works, sometimes it does not, but in the vast majority of cases, the decision to apply for more loans is founded on, let’s face it, no planning or ideas.
I see it every day, I was with a client the other day that had the opportunity to expand his company, and so the first thought was that he needed transport.
A friend in a major bank told him to lease a truck and the friend would be able to push the deal through.
However, when we analysed his business potential, he was in a critical cash flow situation, cash flow caused by bad debts and by him purchasing material, so spending lots of money on a lease and committing his company on a 48 month financial liability was a very rash move.
I asked why he needed a new truck, his answer, you have guest it, was image, he needed a new fleet to show that he was successful, but when I showed him the availability of good second hand trucks available privately and on terms, he saw the folly of his intended actions.
Expand your business, sure, but do it for the right reasons and in the correct way. Expansion is great but it must be controlled expansion.
What do I mean by this, let’s say you have a company that supplies materials, that you get from overseas, You have a good foundation of orders from good solid customers.
Then you get the opportunity to supply another company or worse still, the Government. It’s a dream come true, but beware, it could be your worst nightmare.
Unless you have the capital and the infrastructure to handle the increased work, you could simply leave your company in a critical financial situation and cause yourself dramatic stress.
Controlled expansion is exactly what it says, controlled, slow enough for your infrastructure to take up the increased work, slow enough for the capital requirements to by found with minimum loans.
All us entrepreneurs are constantly looking for opportunities, and will jump into a business expansion without much thought, and unfortunately we all usually get carried away with expansion or just opportunities that come your way. Most of the time in a totally uncontrolled way.
There are golden rules that need to be looked at to be able to embark on a business expansion programme.
Assess the financial impact of the expansion, will the increased revenue actually be achievable with your present capital? Look at the implementation impact have you the staff to undertake the expansion?
Look at the logistics, do your present facilities, office, warehouse, yard, fit the new expansion.
Then look at the market potential, is there a sustained market out there for you, or is it just a one-off expansion.
Undertake a small business plan to assess how much capital you will need and for how long, remember you need to borrow the less money as possible and for the minimum time, loans cost money and stress.
Once you are sure you can afford to expand, look at the actual expansion ideas, just to expand an already struggling business is not a good idea, it is simply throwing good money after bad.
Look at your business, it is imperative in any case, that you know your product and your business, how does it fit in to the market place, what are the competitors and what do they offer. What can you do that is different to their product or service.
Expansion must be sustainable, it must be planned and feasible. Do not simply expand without thought, it will just end in disaster.
I have a constant queue of business people all looking for help just because they expanded to quickly and without any plan or the required capital.
You have a good foundation in your business, and yes with that foundation, it is good to expand but remember the bigger your company, the more people you will have to employ and with this will come more financial requirements and more stress.
This I only know too well as many years ago I had a very good business, managing domestic properties. I had a shop in a main town centre, a secretary and me.
All alone just the two of us made me lots of money and I was able to go on overseas holidays each year and I drove a Merc sports car.
Life was very good, but I got big headed and wanted to expand.
I wanted to have the largest property rental company in England so I expanded, within a year one had seven branches and 32 staff.
One Christmas, while I was hosting the company Christmas dinner, I stood making the customary speech and my mind wandered, I stood there looking at all 32 faces and realised that, sure, I now had the largest rental company in England, but, I had 32 headaches, I spent the entire working day putting out fires that my staff had started by saying or doing the wrong thing, and I was too busy to go on holiday.
Also by the time that I had paid everyone I had no money left for me.
My stress levels were sky high and I had lost the drive.
Expansion was in fact a nightmare.
My problem was that greed got in the way of good business, I wanted to be the biggest, I wanted the image, but did not have the infrastructure in place, I needed a general manager to run the day to day operation, I needed more capital before I took on seven sets of shop fitting.
Simply, I did not think it through before I launched into the expansion programme.
So beware, expand yes, there are many opportunities in Zambia to expand into, but do it cautiously, expand in a controlled manner, plan the expansion or make sure you are in control at all times.
Do not expand into a market that does not give you increased income, expanding into a dream is folly.
Increasing your market share is good as long as the market can take it. Make sure you are protected, by expanding into a market that has lots of competition is risky, a competitor with more money can just enter into a price war and all is lost.
Remember Zambia is full of followers, they will wait and watch you expand, then copy you. So expand in a way that is unique, have a good USP, (Unique Selling Point) Expand within your financial and logistical limitations.
Do not overstretch your customer service.
For example, do not open another shop with the same staff, you will just reduce the customer care and infact drive the customers away.
Expansion is like starting a new business, it needs a business plan, it needs a degree of strategic planning, it needs achievable goals and it needs funding.
However, expansion of your business is easier, you have a good foundation, you know the market, you know your product and you have very good customer relationships.
Or do You ?