We were interviewed for an article for the NFIB
Expansion Plans
07/ 25/ 2007
by Lena Basha
How to know when to grow
When it comes to her made-from-scratch bakery business, Mary Ardapple is never satisfied with the status quo. Since her Peoria, Ill.-based Apple's Bakery opened in 1989, Ardapple has moved locations three times, expanded the menu threefold and opened up her bakery's doors to the world with an online store. The next goal on Ardapple's list is to launch a health-conscious line of baked goodies this fall--and clear $1 million in revenue next year. Whether it's money, knowledge or, for small-business owners, success, it's human nature to crave progress and seek more. But what happens when you satisfy that initial hunger? You expand, say Ardapple and the other small-business owners we profiled. Growing their businesses was never a matter of if; it was only a matter of when. But what time is the right time?
When business is running smoothly
When Ardapple decided she was ready to transition Apple's Bakery from a back-door business to the hybrid bakery-caf-market it is today, she first made sure her existing business was running smoothly.
"I'm like the rabbit that's constantly chasing the carrot," she says. "I believe business should be mastered and then expanded. And I fully intend to repeat that process until I've reached the moon. But you have to be really good at what you already do before you try something else."
Anita Campbell, a Medina, Ohio-based small-business growth consultant, suggests getting to the root of why you want to grow your business. Oftentimes, she says, small-business owners think they need to grow their sales, when it's profitability they need to consider first. Believing that a 10 percent boost in sales could solve all your problems, for example, is usually triggered by challenges with the existing business, Campbell says. Unease and anxiety in your present company is a red flag that you're not ready to expand.
"First and foremost, your operations need to be functioning well," Campbell says. "If you have unsolved operational issues, growing sales usually exacerbates the issues and can make them worse--which can bring a business to its knees."
Even if you've mastered your existing business, you can't neglect it when you decide to expand. When Ardapple started her online business last year, she feared that her walk-in customers would feel left out as the bakery grew, assuming that her made-from-scratch promise would fall by the wayside as Apple's Bakery increased its volume. "They like you how you are," she says. "It's a delicate balance when you're trying to expand without turning off established customers."
No matter how big you become it's essential to focus on what made you successful in the first place. "Then fold your growth back into the original business," Ardapple suggests. "When you try a new concept, even if it eventually fails, you won't go out of business if you've maintained your heart and soul."
When 80-hour weeks are the norm
A year after going into business for themselves, Mark and Tracey McCullough, owners of Brentwood, Tenn.-based Signs by Tomorrow, realized that they couldn't go it alone if they wanted to see their business grow. "We could only work so many 80-hour weeks," Mark McCullough says.
"We got to the point where we were doing as much as we could, and our heads were still barely above water. So there was no way we'd be able to grow the business." It was clear that Signs by Tomorrow needed help, but the McCulloughs felt caught in a Catch-22: Without growth, they couldn't justify hiring someone; without hiring someone they could never grow.
"If you wait too long to bring someone on, your business can get to a point where you can't even meet expectations," he says. "So we went with our gut. We hired our first employee believing that the business was going to grow into that person."
The gamble worked. In fact, it wasn't six months before the McCulloughs needed to hire a second employee. Taking a slow and steady approach to growth, they hope to add another employee in 2008.
Expanding the back end of your business may not feel like business growth, Campbell says, but improving existing operations can lead to repeat business and referrals from happy customers, which can result in growth.
When customers are asking for it
For Mike Nobis, the signs pointing toward growth at his century-old commercial printing business were crystal clear. His customers had long asked when he would expand into the complementary field of mailing services--in fact, they practically begged him to take that next step. It wasn't until certain customers started looking elsewhere that Nobis finally saw the handwriting on the wall and expanded Quincy, Ill.-based JK Creative Printers into JK Creative Printers and Mailing.
"We had considered adding mailing to the business for a number of years, but we were able to get by without it," Nobis says. "Sometimes small businesses get so stuck in their ruts of how they do things that they forget to look at the signs. When I finally opened my eyes and got the ball rolling, I realized there was a whole revenue stream we were missing. Now that I look back, I wish I had gotten in two years earlier. It was all there; I just couldn't see it."
For Julie Duffy, customer feedback was all she needed to take the plunge and begin franchising her home meal prep kitchen business, Dinner by Design, three years ago. "Starting out, I didn't have a growth plan for the business," she says. "It was really just going to be a hobby. But as soon as we opened, people were telling me that I had to franchise."
Duffy did some research and found out that other organizations were franchising similar concepts in other areas of the country--but not in the Midwest, where her Gray's Lake, Ill.-based business was located. "Being the first one in your market means everything, so I knew we could be successful," she says.
Duffy immediately started looking for a franchise lawyer, and four years later, she has opened 56 Dinner by Design kitchens in 12 states, with another 27 on the way.
In addition to propelling your growth, market signals can also stop you from making a grave mistake, growth expert Campbell says. "Business owners planning to grow their businesses should look at what their specific market is doing and how the economy in general is performing," she says.
And the more your business is affected by the economy, the more you have to think about how the economy is affecting your customers. "Is it causing them to tighten their belts?" Campbell asks. "If so, you probably shouldn't be expanding."
But no matter what the market or your customers are telling you, Apple's Bakery's Ardapple has a warning: "No matter what you hear about how imperative it is to expand, make sure it's your decision," she says. "When you're a successful small-business owner, people will tell you things that sound very attractive, like that my bakery should open a second location in their hometown, for example. And that, of course, makes you feel good. But you have to be careful. Make sure you're thinking for yourself."
When you've made a plan
No matter how much the market screams for your business to grow, you're not ready to take the plunge until you've made a plan, including how you'll pay for the expansion, and how you'll measure your progress. Before franchising, Dinner by Design's Duffy had to map out plans for marketing, advertising and franchisee training. Despite a background in marketing, Duffy still researched industry best practices and even called upon the companies she admired for advice, including Jimmy John's Gourmet Subs. "I picked up the phone and called because I liked how the company marketed itself," she says. "They took my call, and some great ideas came out of that conversation."
Growth expert Campbell says one of the most important people on your growth team should be an accountant or financial adviser. "They can really help you understand your business from the inside out, which is necessary when projecting future cash flow that will help pay for the expansion expenses," she says.
It's also important to make your projections realistic. "Don't be overly optimistic," Campbell says. "Allow for a little cushion. That way, if you don't make all of your growth projections you won't go out of business."
When you're confident
In 2002, Nancy Roesner noticed a slump in sales at Copley Feed and Supply, the Copley, Ohio-based store she's owned with her husband Mark since 1985.
"Times were changing," she says of her 10-employee store. "We were having fewer farmers and more baby boomers shopping with us. Our store was small, dark and uninviting to this new generation shopping with us. It was apparent that people wanted more than the one-on-one service that we supplied. They wanted to look around and help themselves."
So the Roesners made the decision to expand the store from 600 to 3,200 square feet. "We were scared at times, wondering whether we were doing the right thing," she says. "Here we were going back in debt at the age of 50, but we knew our business well and were confident that it would grow."
Since opening the expanded store in 2002, business is better than ever. "The growth has been phenomenal," Roesner says. "I know that if we hadn't added on, we would be back to a two- or three-person operation today."
One reason Mike Nobis of JK Creative Printers and Mailing decided to wait to expand was he underestimated himself and his company. "As a small-business owner, your biggest enemy can be yourself," he says. "But the truth is, if you've been successful in your business and done your homework, there's no reason why you can't grow successfully."
NFIB.com
Learn more about preparing for business growth in the "Growth and Planning" section of www.NFIB.com/toolsandtips.
Expanding Made Easy
Timing your business growth is crucial--no matter how you hope to expand your business--but specific plans require specific considerations.
Before you expand product and service lines: Don't be afraid to change your mind, says Mary Ardapple of Apple's Bakery. When a tapas menu wasn't taking off like Ardapple had anticipated, she pulled the plug on the concept after about a year. "I decided that it wasn't going anywhere," she says. "People just didn't get it. By no longer serving tapas at night, I was able to put more energy into making the successful parts of my business even more successful."
Before you hire: When hiring, Mark and Tracey McCullough of Signs by Tomorrow look for candidates who can wear many hats. "Our first hire was someone with a graphic design background, which helped bring our sign designs to another level, but he was also friendly, which meant he could help out at the front desk or on the phone with a customer if necessary." The McCulloughs also place a lot of value on potential, something particularly important in young businesses that need to pay close attention to their bottom lines as they grow. "There's something to be said for hiring people who have potential," he says. "If you hire someone with a positive attitude who has the desire to grow with you, the sky's the limit."
Before you invest in technology: Think big and go for it, says Mike Nobis of JK Creative Printers and Mailing. He made the mistake of making too small of an upgrade because the prices intimidated him. "You're always better off overbuying than underbuying," he says. "There's nothing worse than buying a brand new piece of equipment, and before it even gets delivered, you've already outgrown it because you didn't think big enough. That's when it gets expensive." Nobis suggests ordering a system that is 25 percent to 30 percent bigger than what you need presently.
Before you franchise: Selling your concept to franchisees and then handing over the reins won't bring you any money, says Julie Duffy, owner of Dinner by Design. Instead, she says, you have to invest in an ongoing relationship with your franchisees, which should include regular trainings. "We hold annual meetings, we're in the kitchens doing inspections, and we share news and best practices during regular teleconferences," she says. "Too many people are under the misconception that creating a franchise system is creating a cash cow. They need your support to succeed, and for you to support them, you need to spend money."
Before you add space: Avoid downtime--and lost business--says Nancy and Mark Roesner, who expanded the Copley Feed and Supply store without closing a single day. "We built the new facility adjacent but separate from the current space, so it was just business as usual all through the build," Nancy Roesner says.
|
