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Knowing when to expand your business

Does upbeat economy also mean expansion?
By Henry Ong |

Q: With the recovery of the local economy, is it safe to expand business now?

 

A: Yes. It is a good opportunity for any business to expand when there is a clear sign that the economy is recovering.

When an economy expands, there is expectation that consumer spending will rise which will be good for business because there will be higher sales and income that will be generated.

 

When you expand your business, it means that you are anticipating greater demands for your services and products therefore you need to increase your capacity.

 

But before you do that, you need to ensure that expanding the business will be feasible. How much capital do you need for your expansion? How many months do you expect to recover your investment given the increase in cash flows? Are you going to borrow money from the bank to finance it or use your own cash? What are your downside risks if economy fails to sustain its recovery and how do you minimize it? These are some factors that you need to consider when planning to expand the business .

 

Henry Ong, CMC, CMA, is president and COO of Business Sense, a business advisory firm that provides expert solutions to small and medium sized companies. You may reach him at hong@businesssense.com.ph.

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