After being in business, the ultimate objective of every businessman is MSME growth. After being in a small business for some and accumulating a sizeable client base slowly and steadily, every business owner thinks now is the right time for MSME growth. However, business expansion should only be considered when he is confident that his product or service and is looking for new opportunities. A growth or expansion opportunity can also be considered when customers are asking for more locations.
Having said that, as starting a business requires careful planning, so does MSME growth or expansion. Let’s take a look at the points that the MSME owner should consider while planning MSME growth:
Knowing the Geography
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The choice of location for MSME expansion makes a difference and so, it is important to select it carefully. You must explore the competitors. The right location will be the site which is central to all the potential customers. In addition, necessities such as electricity, water, good road, and availability of labor are important to consider while expanding the business.
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Analyze the capabilities before gearing up for expansion. It is important to ensure that there is talent that can support the business as an expansion, i.e. that there will be more work to perform. So, it is important to be prepared with the talent which is willing to work. In addition, it is imperative to take a look at the available machinery and equipment and calculate if the capabilities are sufficient.
This will help in assessing if there is any need to buy additional machinery or equipment or to hire more staff and talent. In addition, it is also important to decide if managing all the operations from one center will be feasible or there is a need to set up a new operation center.
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First, start if there is a need to get the service of market research. Is there a gap in the market that the product or service can fulfill? Can customer reference help you the business in its expansion? It is important to determine if there is any competition in the market? If yes, then the product can help in offering a cost advantage over the competitors or fulfill the need that the competitor cannot.
It is important to determine if the business owner can be successful in this business or if he can be successful elsewhere with the same capital and hard work. The previous success of the business will help in determining who buys products and services and who the target audience is.
It is also important to determine if there is a need to set a new target audience for a new location or the same set will work. There can also be a need to avail a business run for various marketing campaign which will help in grabbing the attention of the audience.
Business Funding VS Equity Funding
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For an MSME expansion, business funding is required. Business funding can be done in two ways- business loan or equity finance. The business owner can avail a business loan and pay it off in regular installments. And the business loan obligation will be over as soon as the loan is completely paid. A collateral-free business loan or collateral business loan can be availed.
Equity funding is also an option but the business owner will have to sell a few shares of the business. In addition, he will also lose the decision making power and will have to ask the partner for every decision before implementing it.
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The growth and expansion plan must include SWOT analysis – Strength, Weakness Opportunities, and Threats.