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Thinking of expanding your business

Thinking of expanding your business? Or outsourcing non core functions? A few checks and balances need to be looked at before heading off to new places

Your business is on track (notwithstanding the usual bumps and humps); perhaps you’re thinking of expansion? Most entrepreneurs who are on the right part of the growth curve are forced to reach out to new geographic markets. Or perhaps you want to outsource more of the production side or manufacturing side of your business. In either case, there are clear goals but often much less clarity about what lies ahead. To do it right, a number of issues need to be examined:

  • Make sure it’s what you want. You may get more revenue but you may also greatly increase the hours you need to work–especially if you’ll have to travel. New markets need to be visited and tested. You may also reduce how much control you have over the business, as you must delegate authority to others.
  • Make sure it’s what you want. You may get more revenue but you may also greatly increase the hours you need to work–especially if you’ll have to travel. New markets need to be visited and tested. You may also reduce how much control you have over the business, as you must delegate authority to others.
  • Have the people in place. Adding new geographic markets usually means adding people, including management positions. Before expanding, identify suitable new hires or existing employees who have the potential to move up. Can head office handle all admin for example or is there a need for direct, on-the-ground customer service support?
  • Manage costs carefully (and measure them constantly using our work earlier in the book). Expanding can add costs even faster than it adds sales. Add 50 percent to any estimate of the cost of opening in a new market as a buffer.

Overruns can come from unexpected places. For example you may need special security needs or specialised storage requirements that add costs.

  • Legal costs associated with leases and special conditions imposed by local councils can be punitive if not allowed for in capital budgeting
  • Budget for more and costlier pre-launch marketing to make sure sales reps have enough leads and order flow to keep them productive from Day One
  • Consider using contract employees, at least at first, to keep costs low and flexibility high.

As far as logistics – that part of the supply chain process that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption, in order to meet customers’ requirements – it can be a minefield without proper research. It’s evolving rapidly in response to the changes noted earlier and is dominated by industry giants such as Toll and Linfox, each with multibillion dollar revenues operating across the Asia Pacific region, providing logistics services to the region’s top FMCG producers. Bottom line is this: get a good adviser and you will save money in the long run.

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