When is the Right Time to Expand Your Business

How Do You Know if You're Ready to Expand Your Business?

Plant for Profits Column, Leslie F. Halleck

You’re struggling in your horticulture business to generate enough revenue and turn a meaningful profit. So you start looking for new ideas, new profit centers, or new locations to try and bolster revenue. While expanding seems like a logical way to remedy a cash flow problem, expanding too fast, or into too many different profit centers, is one of the most common mistakes horticulture entrepreneurs can make.

I see this happen frequently in both the plant retail and horticulture service sectors. In fact, “should I expand my business” is probably one of the most common questions I get from clients when they come to me struggling.

My answer? It’s usually a hard “no”. At least it is initially.

Why? Because if you haven’t yet figured out how to make your current business model successful and profitable, it’s unlikely that duplicating the dysfunctional model on a bigger scale is going to be any easier or more profitable. It is likely, however, that it will exponentially increase your headaches. A smarter move is to steady and tighten up the ship you’re on, before you go launching more leaky boats.

When it comes to retail operations, such as garden centers and plant shops, if your current location isn’t generating the inventory turn velocity needed to hit both your revenue and net profit goals, then opening a 2nd location isn’t going to solve your problems. A much more profitable move would be to invest time and resources into figuring out why your inventory isn’t moving as it should. Do you have an inventory management system that allows you to know exactly what you have and tightly control? Are you accumulating the right kind of data to make forecasting effective? Are you using an open-to-buy system to make smarter purchasing and stocking level decisions in live-time? How about your marketing calendar…is it tied in directly with your buying or growing activities? Do you have a good handle on recruiting and staff management with good retention rates? If your answer to any of these questions is “no”, then you have some work to do before you sink more capital into another location.

Once you reach a place where you’re hitting revenue and profit goals, your inventory turn velocity is on point, and your customers are still happy, then expansion makes more sense.

Sometimes you unintentionally end up taking on more work than you can or should manage due to the snowball effect. This is particularly true in the services segment of the industry. You start doing some garden maintenance work for a homeowner and the neighbor comes over and asks if you can help them. Then they tell another neighbor, and so on. You’re so worried about turning down any business that you keep saying yes; potentially taking on types of work you’ve never done before, or perhaps can’t yet quite manage adequately given your current business infrastructure. I’ve experienced that myself as a garden services entrepreneur, and I know how quickly new work or types of work can pile up faster than you might be ready for.

But you’re just too afraid to say “no”.

In reality, taking on more and more clients may not end up making you more profitable; it could end up just spreading you too thin and working too hard for too little. Not every new client is a good fit for you and they may have needs or expectations that exceed your ability to deliver. The goal in growing or expanding a service business is not to take any client you can, but rather target the customers you want because the work they need performed and the price they are willing to pay align with your company goals and capabilities. Once your operation is running smoothly and profitably, and you know how to deliver on your promises to clients, then expansion could be your next profitable step.

This is not to say that every business won’t experience natural growing pains at particular stages of revenue or growth. Taking a business from say the 400-500K level to get over $1 million, often causes a stretch in infrastructure. The same can be said for pulling past $5 million, or $10 million, etc. There will always be points at which you feel you have to stretch a bit thinner than you’d like to get over the next hump.

In reality, taking on more and more clients may not end up making you more profitable; it could end up just spreading you too thin and working too hard for too little. Not every new client is a good fit for you and they may have needs or expectations that exceed your ability to deliver. The goal in growing or expanding a service business is not to take any client you can, but rather target the customers you want because the work they need performed and the price they are willing to pay align with your company goals and capabilities. Once your operation is running smoothly and profitably, and you know how to deliver on your promises to clients, then expansion could be your next profitable step.

This is not to say that every business won’t experience natural growing pains at particular stages of revenue or growth. Taking a business from say the 400-500K level to get over $1 million, often causes a stretch in infrastructure. The same can be said for pulling past $5 million, or $10 million, etc. There will always be points at which you feel you have to stretch a bit thinner than you’d like to get over the next hump.

My advice here is that if you’re confident in reaching that next revenue goal, don’t be afraid to invest in what it takes to get there. Running your staff too lean for too long, without the right equipment or tools to do the job, isn’t going to get you to that goal faster and you may lose out on brand confidence, customer satisfaction, and good employees. Have a plan in place for what it will take to get your business to the next level when increases in business or revenue begin to strain your infrastructure.

If you’re currently struggling to reach your revenue or profit goals in your business, it can be tempting to go into expansion or “new idea” mode. I’ll challenge you to take a step back and get granular about all of your existing operations, protocols, and procedures. Are you tightly controlling your product and services, is your pricing strategy on point, and are you investing enough time and effort in good proactive marketing?

Look for the low-hanging fruit. In which areas of your business are you already profitable? Maximizing, or expanding, what’s already profitable is a much faster way to positively impact revenue and net profits than trying to come up with an entirely new profit center.

Once you feel you have a good grip on your existing business, and your products and services are turning at a rate that helps you achieve your revenue and profit goals, then you’re ready to expand your business or open a new location.