The American dream is to own one’s own business. The dream usually starts with a small business, and then it becomes so successful that the owner begins to expand. Sometimes the business isn’t as good as you hoped it would be, and you get the idea that you need to add features in order to make money. This is bad business planning. It’s bad because this kind of expansion happens on credit. If your plan doesn’t work out, how will you pay back the loan? Keeping that in mind, it’s best to save money for expansion.
Wait until your business is successful. When you’re outgrowing your current space and inventory, then make the expansion. Just make sure you’ve saved the money for this possibility. Even if your business seems to be exploding at the seems, it could be that it’s as big as it’s going to get. The loan you make to expand could still be your financial downfall. Small businesses that expand successfully do it with as much cash as they possibly can. The less they finance the better.
If cash isn’t an option, it might be time to consider bringing in investors. Some of your best customers might be interested in getting in on the profits. Let them help you finance your expansions. Just make sure you have a clear contract with them that doesn’t cause you to lose control of the business. In this case, you’ll still need to have enough money to be the majority stock holder. It’s pretty obvious that saving money needs to be happening from the first day you open for business. If it’s not used for expansion, it could be the money that saves you in the event of an emergency.
Never run a small business above your means. At the end of the day, if the business is unsuccessful, you want to be able to close it without owing anybody any money. Keep your start-up simple. Expand in small steps. Don’t get in a hurry. Sell quality and reliability, and the expansion will come naturally.