17 Nov Biz is Growing! I Need More Space! Part 2
Business is going so good, I’m bursting at the seams! This article is part two of a three-part series of how to plan for and manage the expenses that come with a growing business. Our first article in this series focused on hiring that first talented staff person to support you. It’s a good thing, your business has grown to the position that you have used up available space resources and are kind of sitting on top of each other. Not that it is a bad thing, you love your office manager, but maybe it is time to have a few conversations in a setting where she won’t feel like she is on a 3-way conference call! It is finally time to consider your first office space away from that home office or maybe a bigger office space before you all end up getting on each other’s nerves.
“If you build it, they will come.” These famous words from Kevin Costner’s 1989 movie, Field of Dreams are words that I often see applied in the small business community when sales growth is good and cash flow is on the rise. It is especially true of medical arts businesses like doctors, dentists, therapists, acupuncturists, and chiropractors. However, planning for the financials behind a growing practice requires more than just a cornfield and a prayer. Here are some things to think about if you are considering expanding your space.
Is your business one that requires a storefront or can you grow virtually instead? So many businesses today are not of the bricks and mortar variety. Is there a way that you can serve more clientele without the commitment to a larger footprint? Perhaps you could sell certain products online, invest in service providers who are not onsite or consider third-party storage. Can your clients be well-served via webinars or Skype meetings just as easily as they could sitting across a conference table from each other? In my business, cloud accounting has made it possible for me to extend my reach far beyond my physical boundaries, and still be home in time to shuttle my kids to their activities and events. Plus, I don’t have to push as hard for on-site meetings because of the high quality of virtual face-to-face meetings through services such as Zoom and Citrix.
Have you priced out the cost of convenience? Consider where and how your employees and clients connect with you now. Will you still be able to serve them in a new space in a different area? Are you subject to lose your talented staff or fabulous clients by moving locations? What about for you as the business owner? Will a new office location be conducive to your lifestyle? Will it open up new opportunities that had been out of your reach in the past either personally or professionally?
Have you saved for space buildout and tested how those numbers fit into your current revenue environment? Spend some time with a commercial realtor to look at potential locations and costs of buildout. Don’t forget to include the cost of utilities and building maintenance as well as parking for staff and clients. It is best to consider what your average profit is on a month-to-month basis in comparison to how much money you anticipate the new space will cost. It is likely that even though you have new space, there will be a waiting period before you see increased sales volume. If you have more space, you can serve more clients but those new clients don’t just flood through the doors the second you open. It will require time and increased efforts to bring in new clients. How long will it be until you can consider your new space operating at full capacity and what will you do to make sure you have enough money on hand to get you through the transition period?
Are you going to need to seek financing options for the expenses incurred? Business moves require the expense of moving, the cost of buildout and the downtime of your operations while your company is relocating. Will you have enough to get you through these expensive events? Do you qualify for an SBA loan or could you do crowdfunding? Loan applications take time to complete and you are often waiting for long periods of time to hear back from potential lenders. Have you built this into your timeline? Have you considered the ideal time to move? If you have certain times of year where business is much stronger than others, it would be best to avoid such high-points and make changes during the slower season.
How will your capacity change with the introduction of the new space? Based on your income revenue streams, is there one of your revenue stream that is seeing considerable growth while other areas are falling behind? Are you building space that serves the needs of your client tomorrow? One of the things I remember a time not long ago where I headed to a bricks and mortar store to get supplies for my house. Now, with Amazon Prime, I am not driven out of my house to pick up paper towels when I need them. People did not have to go out to the store anymore to pick up supplies, they have other options. One can only assume that if you are planning on expansion, that you have done your homework on what is growing in popularity and what is on the downtrend. Don’t make costly investments in infrastructure without researching the audience and where their purchase trends are headed.
Will your new location be impacted by local and federal tax changes? Be aware of how changing municipalities and states could impact your tax burden. Additionally, does the location change have any impact with regard to insurance or license requirements?
There are many things to consider when deciding if a bigger office space is right for you. It pays to spend time doing the research in all areas, as the more you understand your future, the more you are in control of the expectations and results. We offer forecasting and budgeting models that are live and integrated into your QuickBooks Online solution. This will allow you to be fluid in making changes to your changing circumstances. If your business is thinking about a move but you aren’t sure of the costs required and need help in the planning process, let us help you build that budget and save for it. In this case, no surprises means that you have planned thoroughly and well. Congratulations, you have a vested interest in being more profitable and executing with accuracy.