Business Expansion

Business Expansion Strategies

This information is taken from the Australian version of The Business Legal Lifecycle Book written by Jeremy Streten.
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Phase 7 – Expansion /Franchising /Licensing or Buying an Existing Business

The expansion, franchising or licensing phase of the Business Legal Lifecycle (Business Expansion phase) focuses on building your business to be a bigger asset. When a business expands, all of its issues and problems are amplified so, for this reason, this phase closely follows the Maximising phase of the Business Legal Lifecycle. The Business Expansion phase covers the fundamental requirements of expanding your business, including securing new premises or offices, as well as franchising and licensing the business.

It is at this point that all your hard work in the preceding phases will begin paying off or, if you skated past some of the fundamentals, the flaws in your business model will be exposed and amplified. One option that may be open to you to expand your business is to purchase an existing business after giving careful consideration as to the value of the assets you are purchasing, the role they will play in your expansion plans, and how the new business will integrate with your existing business.

From the Case Files

I have seen many businesses try to expand to the point where they simply disperse their problems from one location to many. One accounting firm that we work with started off in just one location, before quickly realising that they needed a second office closer to the main central business district of Brisbane. The accounting firm did not properly establish all of their systems and did not put all of the procedures in place. As a result, when they opened the second office, these problems were amplified. For example, their phone and computer systems could not cope with the new requirements of having dual office locations. The firm was forced to quickly put the new systems in place and do twice the work that should have been required. If these considerations had have been made before the expansion of the offices, the problems could have been avoided and the business would not have suffered as a result.

Franchising is not for every business or business owner. When you sell a franchise (see section 7.2) you are selling your business as a product for someone else to use. The business needs to have all of its systems and procedures established correctly before franchising as otherwise you will not be selling the system in its entirety and no one will buy your franchised business.

This phase is positioned in the Business Legal Lifecycle just after the dip caused by the previous phases, because when a business successfully navigates this phase, it is set up for growth and prosperity in the future. I will discuss the different options open to a business at this phase and some of the key documents and considerations that you need to think about to prepare yourself for the next phase.

Important considerations during the Business Expansion phase are:

Important considerations during the Business Expansion phase are:

Summary of Business Expansion Strategies

Setting up your business properly will help to increase your revenue and business profile exponentially. If you get this phase wrong, however, it can cost you thousands in extra fees, taxes and potential penalties down the road. Your decision as to whether you decide to simply expand to new premises, buy an existing business, franchise or license your product, will be influenced by your lifestyle goals, expectations and maturity of your business. To get through the Expansion phase, you will need detailed and specific advice from your accountants, lawyers, financial planners and other consultants, to ensure that the decisions you make fit in with your goals and plans for the future.

The decisions that you make for your business during this phase and the advice that you take will determine whether you can take your business to the next level. I have seen too many clients and business owners take short cuts during this phase, whether to reduce costs or to simply save time, with disastrous results that could have easily been avoided. By carrying out your due diligence, taking advice and making measured, considered decisions, you will find that you have a successful business and are ready to move on to the next phase of the Lifecycle: Estate Planning.

Questions to ask before you progress to the next phase of starting your business:

1

If you want to, have you expanded, franchised or licensed your business?

2

Are all of your systems, processes and procedures in place?

3

Do you have a product that other business owners want to use?

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