Planing Your Expansion

This chapter focuses on the following issues:

·         What expansion can and cannot, do for you.

·         What commitments expansion demands.

·         How growth can affect your existing business.

·         How to assess whether your company is ready to grow.

·         How to begin planning your expansion.

What Will Expansion Do For You?

In the long run, the most important thing that expansion will do you for your company is to make it more profitable.

But expansion will pay off in other ways, too, both in the short run an the long run. The steps a company can take to expand may not immediately boost the bottom line, bur they may, foe example, benefit the company by:

·         Reducing vulnerability to seasonal or economic cycles.

·         Protecting existing market share.

·         Keeping competitors from gaining market share.

·         Ensuring continued access to raw materials.

·         Helping it take greater advantage of distribution channels.

 At Premdor, our business is making and distributing wood doors and mouldings for new residential construction, home repair and renovation, and commercial use. It’s both a seasonal and a cyclical business, tied to the always volatile construction industry. For us, reducing the impact of stop-and-start seasonal demand and roller-coaster economic cycles is a key to increased profitability.

Many in business think that the way to reduce the impact of seasonal variations in sales is to diversify product lines. But the problem with that strategy is that the more products you add, the more difficult the company can become to manage. That was one of the problems with the 1980s style of growth. Companies that diversified lost control. Most are now breaking apart, selling off acquisitions and getting back to the basics.

At premdor, we tried something different to reduce our vulnerability to cycles-we stuck to the same product lines but diversified our markets. Now, for example, when demand for building  products is down in one part of the country, the company can still do well because we also operate in other parts of  North America and in Europe where markets might be more buoyant. We are no longer affected by what happens in a single market.

If the bottom line is that you expand to make more money, sometimes that means not incurring losses when the cycle is down.

What Won’t Expansion Do For You?

If  you are contemplanting growth as a way to solve problems, don’t, because it won’t. In fact, growth initially may cause some problems for your company. It always introduces complication and change, which many see as problems.

And expansion will not instantly result in a rosy bottom line. Every form of growth requires a significant invesment. It literally could be years before you see a positive return on that invesment. However, once these costs have been incurred, profits should improve significantly. If  you acquire a company or merge, the new operation might need some degree of  rationalization, which could, depending on the situation, result in short-term costs and require further should improve significantly. If you develop a new markets, entry costs could offset profits in that market, perhaps for several years. If you introduce a new product, you may be looking at a two- to three-year period, or longer, before all your development and start-up costs are writen off and you begin to see your new line producing a profit.

Finally, you should be aware that growth most often leads to more growth, which, in turn, leads to more growth. Even though you consolidate and digest between growth spurts, profits may not be optimized until you have achieved the level of expansion that is dictated by the growth strategy you have chosen.

Growth by What Route?

Your basic business strategy will help you determine which type of expansion is best for your company. For example:

·         If  your current success formula is based on selling your product or service at a lower price than your competitors, you may want to pursue growth that will enable you to source materials more cheaply than competitors so that you maintain your price advantage.

·         If you offer better service and quality than competitors, you may want to grow in ways that allow you to improve production and delivery capabilities.

·         If you want to be less vulnerable to seasonal cycles, then you might consider growth through expanding your markets as Premdor has done.

·         If you want to be more flexible or adaptable to changing economic cycles, you might grow through a merger or an acquisition. Larger companies have more alternatives in though times. And in this sense, expansion is a survival strategy.

  If you are a one-plant operation and you have to close down, you will be out of business. If you have more than one plant, you have more than one option. At the same time, you have more ways of benifiting from good times. Currently, Premdor builds about 55.000 doors a day but has the capacity to build more. Whwn the economy is good and demand for building products is strong, that capacity give us a lot more potential than a company with a capacity to build only 5.000 doors a day.

Bear in mind, too, that as conditions in your industry, in the economy and in world trade change, your current formula for success may not work in five years. If you don’t grow, finding the perfect niche as a small player also might be a viable survival strategy. Staying still, though, probably guarantees failure. If everything around you is changing, you had better change, too-or be left behind.

Do You Have What Is Takes?

While considering which path to growth is best for your company, you also must determine whether you’ve got what it takes to grow without going under. And that means taking a long, hard look in the mirror.

Across all industries, certain characteristics are common to companies that expand successfully. Does your company fit the profile preented in figure 1-1?

If your company doesn’t score on all ten points, you probably need to lay more groundwork before expanding.

If you think your firm fits the profile of a company that is likely to expand successfully, take a closer look-this time at your resources. Bear in maind that every company has limited resources, including time and people’s ability. Do you really have the resources you need expand ?

The Eight Essential-Your Core Resources

The list of eight of the core resources that every business needs in order to expand successfully follows your company’s profile (figure 1-1).

Figure 1-1 Profile of a company that is likely to expand successfully. It ...

1.      Thinks like a bigger company. 2.      Sees markets next door, accross the border and even around the world as its potential markets. 3.      Has proven ability in strategic planning. 4.      Prepares written business plans and has the discipline to follow them; does not have a “last minute” or “crisis” management mentality. 5.      Regularly undertakes careful self-assessment; knows its strengths and weaknesses and compensates where necessary. 6.      Is meeting demand for its product or services in current markets. 7.      Has sound resources in the areas of production, materials, people, finance, time and patience. 8.      Sees change as a challenge, not a problem to be avoided. 9.      Looks at growth as a way to strengthen the business, not as a way to solve problems. 10.   Has asked it self how expansion will affect the existing business.

1.      Commitment.

2.      Knowledge.

3.      Adaptability.

4.      Financial strength.

5.      People.

6.      Communication.

7.      Capacity.

8.      Time and patience.

You need to assess how rich your company is in each resources before you can decide whether to go ahead with expansion. You also will need to come back to this list to test your company’s state of readiness each time you decide to take another growth step. For example, if you currently are thinking of entering new markets at home, review the list to determine whether your company is up to the challenge and has adequate resources to support such growth. If, at a later date, you think you want to expand further by exporting, come back to the list and reassess your state of read-iness. No matter what type of growth you are contemplating, or when you are contemplating it, the core list should be your first stop.

Reviewing the list not only will help begin to plan your growth, it also will help keep you on track in managing what you’ve already got.

1.       Commitment

In thinking about the process you must go through if you are to expand successfully, fostering commitment within your organ-ization is key. Can you do it?

Successfully growth isn’t haphazard. It isn’t the result of an opportunity that happens to fall in to your lap. Successfully growth is planned. It is the result of a decision to pursue growth as one of the major objectives of your corporate strategy. Once you’ve decided to grow-through increasing capacity, adding a new product line, forming a strategic alliance, acquiring another company or by another means-there is no second-guessing it.

At premdor expanding the company is as much a part of what we do as making and distributing doors. These days, our industry is experiencing widespread rationalization as the markets changes from a regional to a North American one. Eventually there will be niche players and subtantial players in the doors industry and our goal is to be one of the latter.

Once you are commitment to making growth one for your strategic objective, pursuing it is no different from pursuing any other corporate objective, such as purchasing a new piece of equipment, upgrading computer system, or motivating your sales force.

However, if even one person at a relatively senior level in your organization isn’t convinced that the company should grow, you will run up againts problem. As president, it is your job to explain to your management team and to other employees, how growth will benefit the company. (Try reviewing the Introduction’s list of nine good reason to grow). If they don’t buy into it, it is because either:

·         They won’t buy into it no matter how good your reasons are, in which case there’s no place for them on the team; or

·         Your reasons are not very good.

   As you think about whether you want to commit your company to growth check your motives:

·         Is ego driving your desire to grow?

·         Are you growing to gain increased personal power and prestige?

·         Is your plan based solely on the fact that you are already successful?

If you admit to any of these motives, watch out-you probably are experiencing the “Midas Touch” syndrome. And your business may suffer as a consequence.

Classic examples of growth gone wrong in the 1980s and early 1990s are also classic examples of the “Midas Touch” syndrome. Think of real estate developers who seemingly believed that there was a never ending supply of corporate tenants and thus built megaproject after megaproject until the bottom fell out of the commercial building market. Think of companies that bought retail operation after retail operation, using the resources and leverage gained from one purchase to prop up the next until, like a house of cards, the empire collapsed. Or think of the once high profile high fliers who thought nothing of having a finger in industries as diverse as real estate, transportation and manufacturing because they apparently believed that every business deal they touched would turn to gold. If nothing else, such examples should serve as cautionary tales, and this chapter should force you to honestly assess your reasons for considering expansion. Your current success may be a requirement for growth, but it’s not a reason for growth. And going bankrupt is neither prestigious nor and effective way to gain power. In business, as in gambling, the odds in the long run are against those with the “Midas Touch” syndrome.

In business that are partnerships, it’s not uncommon for one party to want to go ahead with expansion while the other balks. Sometimes one partner doesn’t want to take the risk, while the other partner is eager to move ahead. Such differences are often resolved when one partner buys out the other. In this type of situation and in situations where directors or shareolders might be reluctant to make a commitment to growth, a motive check is also and order. Ultimately long term profitability and long term corporate success are the only sound motives for growth.

2.      Knowledge

Knowledge is power. And knowledge of your industry and the economy is key to expanding successfully.

In the past three years, Premdor hase made a number of acquisitions, some within months of each other. One reason we have been able to make those moves is our accumulated knowledge of the door industry. We’ve made it a point to know who our competitors are, who is doing well and who isn’t. Keeping that knowledge up to date has been a critical part of our growth strategy and thus has allowed us to negotiate deals at the right time and at the right price.

One of he important benefits of developing a highly focused picture of your industry and the economic conditions affecting it is that in the procces you also develop a sense of timing. This sense of timing is one of your best assets it means that your expansion is not left to chance and that you know what moves to make and when to make them.

Often the timing for taking certain growth steps is the reserve of what people think. A recession for example presents some great opportunities for growth especially througth mergers and acquistions. Management at a target company is likely to be more open to the idea of sitting down at the negotiating table and prices will be lower than in good times Recessions also present opportunities to build market share. If you have a new idea that distinguishes you from your competitors, client who are trying to boost their own sales are more apt to listen. Tough times can also be good times to from strategic alliances because in tough times, people are all ears.

You skill at spotting good opportunities in bad times is directly related to the breadth, depth, and quality of your knowledge about your industry.

Much of Premdor’s growth has taken place during the worst of economic times-1989 to 1993. Our approach to selling doors is heavily weighted toward innovative marketing and merchandising. When times are good and the building supply outlets that are our market think they are selling all they can, they are not as interested in hearing about new approaches. But in tough times, customers and potential customers stop and listen when they hear that we are going to offer them point of sale displays, training clinics for their staff and in store decorating seminars for their customers. They are anxious to find new ways to increase theor sales.

Your ability to identify good opportunities in good times is also a product of knowledge. In good times, growth strategies change. For example, when the economy is strong, it’s tough to make acquistions. People don’t want to sell because they are doing well and even if you can convince them, they probably want to much money. Opportunities for megers and strategic alliances don’t arise nearly as often in good economic times either.

However if times are good your company is probably doing well, too. That means you have more money to invest in exports, in new product development, in new ways of merchandising and in trying to enter new markets. And establishing your position in a new markets will happen much faster in good times that in bad.

Your knowledge base can also give you an adge in another way. Today many industries, especially in the manufacturing sector, are aging. Like the door industry, they started up in 1950s and most, if not all, of their management worked its way up through the ranks from the plant floor. Current management in these aging industries is often no exception. It experience is in production, not in professional finance, marketing, or merchandising. Thus, if yours is aging industry but you have put together a managementteam wuth depth of experience in finance, marketing and merchandising, you have an advantage over competitors who are strictly production oriented. Your financial know-how can help you build a solid base on which to grow larger than your competitors and your marketing expertise can help you increase market share at their expense.

3.      Adaptability

A succsessful company that expand may find that its formula for succsess breaks down on a larger scale or doesn’t work in another market.

How adaptable is your business? To a degree, your answer will depend on whether you sell products or service. If  you run a hands- on personal services business in Toronto, for instance, it probably will be difficult to open up shop 200 miles away in Detroit, much less 3000 miles away in Vancouver or Los Angeles. If you make snow shovels, chances are you won’t expand into the southern United States. When you consider whether growth is for you, you have to look at what you offer, the conditions for which your product or service is meant and the specifitions. Some businesses just are not as adaptable as other.

In Premdor’s case, our desire to expand throughout North America and beyond makes sense because doors are used around the world-they are truly a global product.

To a certain extent, the geographic location of your business also affects your adaptability. If yo want to export, are you in a good location to do so? If your business is in Nevada and you want to export to Europe, are you in the right place? Perhaps it would be better to set your sights on the far East, provided that your product or service is adaptable to that market.

4.      Financing

Financing is a resource. If it’s scarce, it’s like running out of  inventory. No matter how many orders you have, you won’t be able to fill them unless you have sufficient financial resources.

Chapter 2 explains in detail the type of financial resources and planning needed to grow without going under. In brief, your financial resources must include good financial reporting systems, a healthy balance sheet and a lack of debt or low debt to equity ratio.

5.      Communication

Whenever a company initiates change, people feel uncertain. When your company takes a growth step, uncertainty about its new direction will not be limited to those within the organization. It will also be felt by those outside the company-costumers and suppliers. Thus, an important part of palnning your expansion process is determining how you can reassure employees and clients about the changes taking place. The best way to reassure people is through communication and lots of it. Keeping people informed, as much as possible, helps them to fell that they are part of the process.

The responsibility for communication falls squarely on the shoulders of the CEO. He or she must be sensitive to the fears and doubts that come with change. This is especially important if the organization is growing through a merger or an acquistion. In such cases, employees are likely to feel threatened by potential job loss, the additions of new management, and in the case of a merger, question about which company “won”, which “lost”, and how a change in the balance of power will affect them.

As mentioned earlier, commitment to growth has to come from the top. If you are convinced that growth will benefit your company, even if there are certain costs, such as job loss, it’s up to you to convince your employees that in the long run, growth is in everyone’s best interest. It’s up to you to motivate them to work with change and to feel positive about the fact that the company is working hard to be competitive. Everyone must by in and communication must be open and frequent so that employees do not feel threatened.

Do you, as CEO, have the time, sensitivity, skiils and resources to handle communication that growth demands? Is there a member of your managementteam who could take on these responsibilities? Or should you think about hiring a profesional consultant to help you:

·         Plan internal communications.

·         Identify and deal with issues that might worry personnel, including structural changes within the company of layoffs.

·         Determine how to deal with rumors.

·         Work with and reassure employees whose job responsibilities might change radically.

When Premdor acquired three competitors in 1991, people within the company worried about the changes that might accur. Who would run the operations? Would new mergers come on the scene? Would jobs be lost? Would people be transferred? There was a lot of hand-holding done within the company, not only at the time of the acquistions but also on an on going basis and that hand-holding was based an communication.

There were numerous meetings to bring together key managers, some of whom had never met before. And there were numerous meetings to bring together mangers and employee groups. During that intensive two-month period, our major goal was to get everyone on the bandwagon by explaining where the company was headed, why and how each person fit into the picture.

Three years later, we’re still committed to making communication a priority. We publish a quarterly news latter for our staff that deals specifically with the company’s growth so that everyone, from managers to machinists, is psychologically involved in the continuing expansion process. The result of keeping our people informed is that they are proud of the company and excited about the future-not a bad return on our invesment in communication.

As noted, you also have to be aware of  how your expansion will affect your existing customers and suppliers and their perceptions of your company. If you are growing in order to provide better service or to enhance your marketing capabilities, make sure to let your clients know specifically how the changes in your company will benefit them. If you are growing through a merger or an acquistion, your clients may worry that the known entity they are used to dealing with will no longer provide what they need. Why not consider making a corporate video that explains your new direction and inviting your clients to see it? By making the effort to keep them informed, you are letting them know that they are important to your company’s future success.

A few years ago, after Premdor had grown to double its premerger size, one of our division switched over to computerized ordering and distribution system to simplify, speed up, and improve service to our customers. However, as is the case with introducing any new computerized system, both our staff and our customers had to go through a learning curve before the system really began to benefit them. Staff had to get up to speed on the computer programs, on procedures and on training. Part of providing improved service meant that orders had to be placed by certain deadlines for guaranteed delivery. Thus, customers who formerly would telephone us half a dozen times a day to place or change orders had to adapt.

A short time after we implemented the new system, one of our customers commented to a sales manager that while growth might be good for Premdor, it wasn’t good for him. When the sales manager probed a little more deeply, he found that the client was having some problems getting used to the new ordering system and that he linked these problems (encouraged perhaps by one of our competitors) to our ongoing expansion.

As you grow, it’s important to be aware that your customers perception of your company may change. Keep your ears to the ground and be prepared to take the time to reassure clients that changes in your business will benefit them. We explain to our Canadian customers that a key advantage of dealing with us is our involvement in other markets-we bring a lot of resources to the table. It’s not only the actual impact that growth may have on your exsiting customers that you have to watch, it’s also the perceived impact.

6.      People

Your people are every bit as important as your planning and your product or service when you expand. If you don’t have the right management, the right number people and people with the right abilities and capabilities, you risk not only that your expansion won’t work, but also it will weaken your existing business. One of your onging jobs is to ensure that you have the ability to attract, and  keep, the best people you can find. You not only want to build a winning team-you also want to build such a reputation for winning that all other inthe industry want to be on your team.

While human resources issues are covered in more detail in later chapters in the book, you should stop now to consider the following basic question.

Ø  If you set up shop in a new market, who will run the show? Are you willing to hire new management, or will you transfer someone from your current operation to head up the new one? If you do transfer that person, who will take on his or her previous responsibility?

One of our competitors in Toronto had a sales manager who was so good, the company transferred him to run its new plant in Atlanta, Georgia an it was a disaster. He was in a job and a markets place in which he was lost. Not only did the company suffer from not having one of its best managers in Toronto, it also failed to make a good showing in its new target market. With one ill-planned move, the company lost twice.

Ø  If you paln to increase sales, will you to have increase staff? In which areas-sales, accounting manufacturing, management? Or can you, or outside expert, develop system to accommodate the changes growth will bring?

Over the last four years as Premdor has grown, we’ve brought onboard additional senior financial people, a vice president of sales and marketing and most recently, a vice president who was formerly a partner at a law firm. This last addition is part and parcel of being a public company, dealing with reams of regulation and acquiring a number of companies in a relatively short time. Expanding creates entirely new areas of responsibility. Administration becomes more complex. Doubling in size could mean significantly expanding your adminstration team. So keeping an eye on management is essential to maintaining control while you grow.

Ø  If you merger, will you have too many people on staff? Can someone in-house deal with counseling those who lose their jobs, or should you bring in outside help during the transition.

Ø  If you plan to expand through acquistion, in theory, you’ll acquire instant management. But what if key managers from the acquired company quit the day after you close the deal?

A company that Premdor acquired several years ago got into trouble with an earlier acquistion of its own. The day that company completed its transaction half the management at the target company quit, including the key sales people who went to work for the competition. The senior team at the company making the acquistion just assumed that everyone at the target company would stay and never paid any attention to that part of the transaction. The people who left, however felt that they had build the company and saw no reason to stay and when, in their opinion the owner had just walked away with ful pockets.

If the people in a company are essential toits continued success and they often are the prospective new owner should consider signing them to employment contracts, consider getting noncompeting agreements from the officers, or possibly offering stock option before closing the deal. It’s all a way to tie people to the company, to make people fell that everybody has benefited from this deal-the buyer, the seller, the employees.

Ø  If you export, you are likely to find that customers in foreign markets are more demanding than those at home. What attitude do you and your staff  have toward constructive criticism of your product or service?

No matter what type of growth you pursue and how well you plan for, no expansion ever turns out exactly the way you think it will. Besides being commited to growth, is your management also willing to bend a little? If your team is too rigid, it may break your chances of success.

7.      Capacity

It is fine to say that you want to grow. But can you really deliver to your customers? Answering the following quetion will help you determine whether you have the operational resources you need in order to grow without going under and if you need to increase your capacity, whether it’s worth potential cost.

Ø  Are you meeting demand for your products in current markets? If so, do you have the plant capacity to produce for new markets?

Ø  What is the state of your plant and equipment? Are they state of the art?

Ø  Will adding capacity to meet increased demand, in fact, be counterproductive? Some products and some expansions lend themselves well to economies of scale. Others don’t-doubling sales just means doubling costs, or more. Is your technology easily and economically tranferrable? Or is the technology so expensive that once you reach capacity you have to start again with a whole new plant? Take the example of a company that manufactures fiberglass insualition. Once it reaches capacity, making the next bad of insualation can cost millions of dollars because the company has to build an entire new plant, complete with new furnaces, to fill that order. You can say that you wantto expand worldwide, but once you get to a certain level, it might not make economic sense. Some business simply are not that easy to expand.

Ø  Do you have the capacity to source enough raw materials? Is the worldwide supply of materials you need diminishing or becoming prohibitively expensive or difficult to access? Is the current level of quality of your materials changing? Will any of these factors inhibit your expansion?

Ø  Do you have the computer systems and expertise to cope with more orders, more inventory, new shipping and delivery demands?

8.      Time and Patience

It takes longer for some types of expansion to produce result and profitability tahn others. Growth through acquistion, for example, is usually faster tahn growth through exporting. Nonetheless, all growth requires the recources of time and patience. Do you and your company have them?

Ø  Do you, your senior employees, the company’s directors and shareholders have the time and patience to wait for the long-term financial result that you expect from the expansion? As noted earlier, below normal profits for a period may mean some belt-tightening is in order. Sharehholders may see the value of their shares remain stable or even drop. How long will they wait for share prices to rise or for dividends to be paid again?

Ø How long can you expect management to go through the process of expansion before it sees result? Does your management team see integration of a purchased or merged company as one of its prime responsibilities?

Ø If you have long-term plans for expansion, is your management team prepared to be constantly putting out fires as well as pursuing its normal duties?

Ø Depending on  how you expand, how will your employess react to continous upheaval as you grow, add new staff and enter new markets? Have they the patience to accommpdate the change, knowing that things will “settle down” eventually, either whenyou stop growing and take a breather or when expansion and all the changes that comes with it, becomes second nature and simply part of the job?

Ø Do your bankers and other lenders have the patience to wait out your expansion for improved profits? Will they get nervous if you can’t turn things around in short order? Some companies expand and are profitable almost immediately. Others need a year or two to digest, rationalize and develop stronger, larger, more profitable enterprise. How will your lenders react to what could be perceived as a see of red ink as you buy up competitors or develop new markets? Never forget that bankers are lenders, not venture capitalists. They want their loans to be repaid on time and interest to be paid promptly when due. And the larger their loans, the more they want to know about you, your expansion plans and what kind of progress you are making.

Ø Do your suppliers and customers have the patience to wait out the upheaval that comes with some types of expansion? Getting bigger may mean introducing new computer systems, a new distributio network and perhaps even series of new, improved products. It could mean a name change, a change in your corporate culture and it most likely will mean a change in people. Your suppliers and customers might see a higherthan normal turnover of the people they have become accustomed to dealing with, simply because internal promotions are coming fast and furious as you expand. Both suppliers and customers can get nervous if they perceive too much change too quickly, unless you show them that the expansion and resulting change benefits them directly.

Ø Finally do you have the patience to sopt, sit back, and digest the expansion you have just undertaken? Growing too fast is is dangerous. Every type of expansion needs to be integrated with the whole, and that takes time. No matter how well you have planned, you have to take time out for stabilization0a breather from the constant drive to grow and dominate. Not every expansion gooes exactly according to plan or works out exactly as you expected. If you continue to expand, problems may go unsolved, integration ins’t completed and your next round of expansion may suffer accordingly.

Assessing the Risk

Now that you have assessed your resources, you also needto assess the risk that growth entails and your readiness to assume that risk. Are you willing to put your existing business at risk in order to expand? Answering this question is a must before you go ahead.

In 1987, before merging with Premdor, Century faced this question when we became interested in making our first U.S. acquisition. In order to secure financing for the deal, we had to put up Century’s Canadian assets a security. It was a risk and we could have lost everything if the acquisition hadn’t worked out. But it was a calculated risk, based on our knowledgeof the economy, the door industry and the resources of our Canadian company. We managed the risk and won.

It’s true that you have to take risks to be successful. But those who are most successful know how to minimize their risk. You can buy a hemorrhanging company at a good price and turn it around. Or you can pay more and buy a company that has been successful for the last 25 years. You controlthe risk by the kind of company you buy. You can grow slowly by adding one product at a time to your line or you can go all out and add ten at once. You can expand by entering markets close to home or you can leap into markets across the country or across the ocean. You can watch the downside, know the risk, and control it to the best extent possible, or you can take a flyer.

You also can push a bad growth decision, taking the chance that the success and luck you have enjoyed in the past will continue. Or you can be honest with yourself and admit that somethings is wrong. Being realistic is part of controlling risk.

Not with standing what you’ve just read, you’re likely to have a gut feeling about wheather growth is worth the risk. If you have a good understanding of all the factors that can affect your proposed expansion and you listen to your intuition when making your decision, chances are that you’ll be alright.

Putting the Plan on Paper

If you think you have what it takes to grow without going under get serious and put it in writing. Planning your expansion sould be a formal proccess. Talk is cheap sitting at a table and discussing ideas isn’t enough. It is essential that your ideas be committed to paper. The elements of s good business plan are discussed in more detail in Chapter 2.

Drawing up an organizational chart also should be part of your planning proccess. It will help you identify your strengths and weaknesses. The best way to do your chart is to draw what your organization should look like and compare this with what your organization does look like. Chances are you will either end up with a number of empaty boxes or with too many people for too few boxes. If you already have twenty people who report to the president, maybe you have a weakness-you can’t really add another than if you merge or make an acquisition.

Making the Commitment to Change

The purpose of this chapter is to help you determine both whether you want to expand and whether you should expand. If you are still up for expansion, then read on. If you’re not, you’re still ahead of the game. You’ve made your decision and you know where to concentrate your efforts. And that means you’ve got as much out of this chapter as someone who is ready to read the rest of the look.

If you decide not to expand, or at least not to expand right now, keep want vitally important things in mind: Today, no company can afford to stand still. Trade barriers such as tariffs, duties, and regulation to protect domestic producers are coming down around the world and will continue to do so throughout this decade. Therefore, even if you are not ready to expand in order to meet new challenges, you must be ready to change.

Look around. Are you competitors expanding? If so, they will soon have advantages, such as economies of scale or reduced cyclical impact on their business, taht you won’t have. If you are going to stay small in an industry in which everyone else is growing, palnning is still paramount. Plan to become a niche player. There are plenty of success stories of companies that have done  just taht and have done extremely well.

In the final analysis, the message is the same for small companies, large companies, and growing companies-don’t just keep doing what you’ve always done, get busy planning for change.