With certain cost-saving and low sales targets in place during a recession it may be quite difficult to tell if it’s time to pick up the pieces and gear up for the upturn. Experiencing a long economic downturn makes it is easy for businesses to fall into the slump of keeping profits and sales targets low until the economy improves.
However, when is it time to move away from running a business as though it will always be operating in a recession? It is not always simple and changing strategies is definitely even harder. But every economic boom and every recession must come to an end and you have to be ready to change with the tide.
In switching from survival mode to expansion mode, you have to keep an eye on the key economic indicators and act decisively to expand your business at the right time. This will allow you to take a better stance in taking advantage of an increase in business as demand improves across the economy.
Take a look at these good reasons to expand a business:
1. Improves financial stability
By initiating an expansion you can better move into winning new customers and opening up new sectors for business. This will allow your business to stand on more than two legs and have “less eggs in one basket”.
2. Pumps up knowledge base
With more types of customers and more variety in clients, sectors and employees, you get to have a greater knowledge base from which to improve your service. This also gives you more opportunities to develop processes and systems which improve the quality of service to your customers.
3. Reduces costs
Bigger business means greater buying power. Greater buying power means you will have a higher capacity to buy raw materials, goods and services in bulk, which in turn lets you save on costs.
4. Improves your profits
This is simple- higher purchasing power and spreading your overheads across more units of sales gives you a lot of flexibility in the way that you price your products or services and provides you with an opportunity to increase your net profit.
Growing your business is a natural step but you have to make sure that your business is running efficiently before making any major changes. A well planned expansion can lead to a very significant increase in net profit and can help to recoup the losses or low margins of the long years in recession.