Angela Heit: Owner, Crysalis Consulting
What could be worse than reaching your planned retirement age and realizing you could have walked away with more money in your pocket, or retired sooner, if only you had expanded your business with your end-goal in mind?
I recently had the opportunity to work with a pet-boarding business. The owner had expanded the boarding capacity to handle up to 50 pets through state-of-the-art leasehold improvements that cost two and a half times annual revenue. After completing the facility expansion, he discovered that there's a limit to what the market will pay for pet-boarding services, and even at maximum capacity the business netted far less revenue then anticipated. Profitability was capped by his passion for providing pet boarders with state-of the-art accommodation. As a result we concluded he would have to work at expanding other aspects of the business, and it would be a minimum of five more years before he could hope to sell and retire.
In another example I worked with an RV rental business. Although the business also sold RVs, the owner's passion was focused on RV rentals. Over time, due to a number of factors, the premium paid for rentals steadily declined, so much so that the sale of RVs came to represent more than 60% of annual revenue with much higher profitability than RV rentals. Unfortunately, the owner failed to take that into consideration when expanding the business and continued to put capital into RV rentals.
In both cases the owners failed to look at the long-term impacts of expanding the operations. Had they viewed the business through the lens of long-term profitability and tempered their passions, they would have had a much better chance of achieving their goals and retiring sooner with more money in their pockets.
Guy Thorburn: Manager, EMBERS Ventures
When it comes to expanding a business' operations, no two projects are alike. In my experience there are a few common elements that get overlooked when expanding operations:
Have a party, celebrate and tap a few kegs. Seriously, if you are expanding, things are going well. There aren't many days worth a good solid party (especially birthdays past 40), but expanding your operations is definitely one of them. Savour the moment and tell everyone about it.
If the expansion has been opportunistic or reactive (e.g., in response to one large event or order), make sure that every effort is made to diversify your revenue stream beyond that one customer or order that was the catalyst for your expansion. Losing that one dominant revenue stream without a backup can be a killer.
The importance of a planned and inclusive process that incorporates the needs and wants of all functional elements of the company, from front desk to fulfilment, will greatly increase the chances your plan covers all bases. Expansion affects everyone, so any expansion planning process should be inclusive and include different perspectives from differing roles.
Now back to my first tip. A party is a great way to solidify the team and recognize the new reality. Use this spotlight opportunity to communicate the positives, recognize impacts and changing roles and thank them for their patience and commitment. People like to be part of something new and exciting. Challenges lie ahead, and a motivated staff will make all the difference.
Brian Timmins: Entrepreneur
Anyone who has gone through company growth can tell you it rarely goes according to plan. I have been involved in a few expansions in my tenure, both with employers and my own businesses, and I can say that problems can arise and do arise, problems that no one was prepared for. These problems aren't always caused by any one individual or poor planning.
Having the right people in the right place at the right time during growth can mitigate any problems that might arise during execution. These people can resolve problems on the fly without missing a beat, ensuring a smooth roll.
Being a part of a few expansions myself, currently with Make It Business Magazine, I have witnessed first-hand the flip side of this: the wrong people in the wrong place at the wrong time. Having inexperienced people, or people who are not fully invested, inevitably confuses, delays and derails even the best-laid plans.
Mistakes are hidden, problems ignored and in some cases pivotal components of the plan don't happen. The inexperienced easily miss potential problems, because they don't know what to look for or, if they do, they try to hide their mistakes until the whole thing becomes one godawful mess that is really difficult to hide from everyone else on the team. Then comes the difficult task of asking this person to leave followed by salvage and repair. Expanding a business is like building a wall: strategically place the bricks in the right spot and eventually you build a bigger, sometimes-stronger wall. It is a slow, painstaking process that requires planning, focus, accountability and honesty. People are the mortar that holds the bricks together. Have the right people in place and the wall will stand tall and strong; have the wrong people in place and the wall will quickly deteriorate and crumble.
