Expanding your business is incredibly exciting, but it’s also a huge risk. If you miss the mark and your plans for expansion don’t play out the way that you hoped they would, you could lose the business. Usually, this happens because companies don’t budget for the cost of expanding or they overestimate how much their revenue is going to increase. You can’t take anything for granted and there is always a chance that your revenue will grow much slower than anticipated, which means you need to budget for the cost of expansion and make sure you have enough money to cover it before you get started. If you are expanding your business, these are the big costs that you need to be prepared for.
Increased Staff Costs
If your business is going to grow and expand into new markets, the workload will also increase. Unless you have the right team behind you, you are unlikely to see sustainable growth, which means that you should hire some new people before you do anything else. As you already know, staff costs are one of the biggest business expenses you have to cover, so it’s important that you are able to survive when they increase. Ask yourself how long you can comfortably pay for the salaries of new team members with your current earnings. If it’s not very long, you need to save more money before you start hiring anybody.
Office Relocation Costs
If you take on one or two people, you might be able to fit them in your existing office, if you’re lucky. But if you start hiring a big new team, you’ll need a larger office space, and that gets expensive. Most business owners have considered the increased monthly cost of a bigger office, but they don’t factor in the cost of the move itself. You need to hire removalists to take all of your stuff, you’ll need new furniture to fill the extra space, and then there are added extras like internet and phone installation. Don’t forget that the business will be in shutdown for a few days while you move to the new office, and that costs money in lost revenue.
Market Research Costs
If you are expanding into a new market, researching it is absolutely vital. You won’t be able to create effective marketing campaigns unless you have an in-depth understanding of the market, especially when expanding internationally because different cultures will respond to your marketing efforts in a different way. You can’t afford to cut any corners here, so make sure that you have the money to conduct in-depth research before doing anything else.
Hopefully, your expansion will be a success and you will be selling more products, which means more revenue. But don’t forget that there are costs associated with that too because you will need to buy more inventory and pay for storage. Improving your inventory management systems will help you manage these costs, but there will always be an unavoidable increase that you need to be prepared for.
If your business expansion is going to be a success, you need to be prepared for these key costs.
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