Business Expansion and Success
Published November 30, 2011 | 
Common Business Mistakes to Avoid
Expanding the Business Too Fast
A primary cause of many business failures, overexpansion most often occurs when business owners unknowingly confuse success with how fast they can expand the operating capacity of their business. It is critically important to understand that a focus on slow and steady growth is optimum, thereby avoiding the pain of bankruptcy directly caused by rapidly expanding companies that outstrips highly-inadequate levels of cash on hand.
There has to be an effective balancing act taking place at the same time, since you do not want to repress healthy business growth. Once a solid customer base is established with a good cash flow, allow your success help you set a healthy measured pace. Observe closely for indications that an expansion may be warranted including the lack of capacity to fill customer needs in a timely basis, and along those same lines, employees having difficulty keeping up with production demands.
If after very careful review, research and analysis the expansion is deemed necessary, take the time and carefully focus on identifying what and who you need to add to your business in order for your business capacity to grow. 
Your ultimate goal is to have both the right systems and people in place so you can then refocus your time on the crucial growth of your business, not on doing everything yourself.
Understand that while planned expansion can successfully elevate a business to a whole new level, over-expansion is one of the most serious dangers faced by a business during the growth phase. It’s simply too easy to get carried away in the heat of the moment and to quickly expand way beyond both the needs, and more importantly, the financial capacity of the business.
In using a rule of thumb, you should plan the capacity based on a three-year projection of demand, then allow an additional 10% of capacity over and above that for any periods of heavy demand which most businesses face, or for partial unplanned down-time in any segment of your business. Much beyond this could unnecessarily increase the level of risk and leave your business with unforeseen overheads it doesn’t have the capacity to cope with.
Remember, over an extended period of time a business may go through several periods of expansion and it’s a best practice to phase these according to demand. And don’t try to account for any and every eventuality during a specific expansion phase, or you can find yourself bogged down flailing away at the tiniest of details.
Keep Your Customers Well-informed
It goes without saying that expansion of any kind can cause significant disruptions in your day-to-day operations, and therefore it’s important that your customers know what to expect. So before beginning an expansion, notify them about what you’re planning and what the expected completion date is. In addition, if at all possible, inform them what disruptions to expect and how you’re intending to deal with them.
Be very positive in making your customers completely aware and clearly understand the fact the expansion will ultimately benefit them, along with the specifics of the direct benefits. Throughout the process be reassuring that you have their best interests at heart. Direct communication and on-site signage are two of the most effective ways of keeping customers well-informed during an expansion phase.
Announce the Completion of Your Expansion
Finally, once the expansion phase is complete, it’s important to let both existing and potential customers know about it. Explain about the increased capacity of the business and the additional products and services you now have to offer. Develop a special marketing drive to announce the occasion with media releases, especially to all the local and regional media.
This moment is a great cause for celebration in your business, and it’s one of the very best marketing opportunities you could ever ask for. So be sure you take advantage to quickly begin maximizing the results from your increase in business capacity.
Understand When You Need to Create a Business Plan
Published April 28, 2010 | I continue to be amazed how time after time Entrepreneurs will walk into their commercial bank, sit down with the commercial loan officer and try to explain their need for a loan to help them fund either the start up of their business venture, expansion, or more recently, their pressing and legitimate need for working capital during the current recession. 
The response recited to them by the banker, the same in almost every case, is the need for them to develop and prepare a business plan for what they are trying to accomplish, whether start up, business acquisition, business expansion, or maintain current operations.
The business plan requirement has been standard operating procedures for some U.S. government agencies including the Small Business Administration which works directly with the lenders by guaranteeing commercial loans approved and funded to Entrepreneurs for their small businesses by commercial banks.
I cannot imagine why any Entrepreneur would knowingly asking for a loan without a detailed business plan to present to everyone involved (including themselves) with the loan approval process, providing answers to all their questions and issues with the related risks.
How can any entity from the smallest, to ones the size of the U.S. Automobile Manufacturers (General Motors, Chrysler) ask for any amount of money, especially from the people of the United States without a detailed 
Business Plan outlining the funding needed, defining the “use of proceeds” for the funding, and what they think the results will be, based on a set of general assumptions developed through experience and research (i.e. jobs created, retained, capital formation, etc.).
In looking back over the events of the early recession, the auto makers behaved like they had been told by someone to just show up, ask, and no problem, they would get the funding they wanted with not too many questions in the process, but to their surprise they were told to come back when they had prepared a business plan explaining why they should get the loans and how changes to their business models if any, would result in positive cash flow, associated net profits and positive effects to the balance sheet. This is one of the greatest examples ever, that not having a formal Business Plan is a major weakness in all but the simplest and smallest of self-funded business models.
A detailed Business Plan was also missing for the stimulus package and many questions about the package details were simply met with shrugs and statements like “details would be provided” after funding has been approved, which makes it no wonder that consumer confidence has been shaken to extremely low levels.
Business Plans are never easy to prepare and shouldn’t be taken lightly as a major business tool, even after one has prepared hundreds of detailed plans for projects from businesses representing all major industries and levels of spending, 
but the planning principles remain the same, just as the principles of successful business models remain the same, resulting in profit, cash flow, increased equity, and associated wealth and job creation.
You should always remember that Business Plans should be prepared to provide feasibility information for the process of determining whether funding should even be pursued at all, and if so, what type of funding, and successful Business Plans not only help Entrepreneurs and businesses potentially realize their greatest dreams, but also avoid their worst nightmares as well.