Knowing When It Is Time to Expand: Gut Instinct or Planning?


Business expansion: gut instinct or planning?Business owners always want to know, “when is the right time to expand?”

I wish there were a magic answer.  If there is one, I don’t know anyone who’s found it yet. 

Most business owners tell me they rely on gut instinct to one degree or another.  Gut instinct is that inner voice that tells you that it “feels right” to add another location, hire more employees or take on more debt.

I’m a big believer in trusting your instincts.  But just like the famous Thomas Jefferson saying “the harder I work, the more luck I seem to have,” a similar idea goes for gut instincts. The more information you are armed with and the more planning you do, the better your gut instincts.  That’s why a financial person should be an indispensable member of your team, as I pointed out in “Expansion Plans” by Lena Basha in My Business magazine:

‘ … one of the most important people on your growth team should be an accountant or financial adviser. “They can really help you understand your business from the inside out, which is necessary when projecting future cash flow that will help pay for the expansion expenses” …. ‘

14 Comments ▼

Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.

14 Reactions
  1. David B. Bohl at SlowDownFAST.com/blog

    Anita,

    It’s both – gathering information and planning plus intuition.

    I think Sir Richard Branson said it best (and I blogged about this very subject here http://www.slowdownfast.com/blog/gut-check-dont-analyze-this-question-and-dont-blink-is-intuition-underrated/) when he said: “Restless questioning, the ability to ask the question ‘why not?’ rather than just ‘why?’ – and the ultimate determination to say: ‘Screw it, Let’s do it!”

    “However ultimately, the entrepreneur will only succeed if he or she has good people around them and they listen to their advice. My colleagues know me as Dr.Yes because I always find it hard to say ‘No’ to new ideas and proposals. I rely on them to guide me but ultimately. I’m also prepared to trust my intuition, as long as I feel it is well informed.”

  2. Thanks, David, good point. And leave it to Richard Branson to add something colorful to the discussion. 🙂

  3. David B. Bohl at SlowDownFAST.com/blog

    Neal,

    Great approach. I’m not talking a devil-may-care, throw caution to the wind, overly emotional approach to intuition. I’m talking about a well-honed sense of keen intuition. There is a big difference.

  4. Dave – I’m a big fan of the “‘Screw it, Let’s do it!'” fan club. However, I think that a simple application of the finance Duration model is also appropriate. Consider the business as a simple security and then determine its optimal life. It beats holding your thumb into the wind.

  5. David B. Bohl at SlowDownFAST.com/blog

    Neal,

    Agreed. It’s also a matter of understanding and being able to assess and quantify opportunity cost.

    David

  6. Dave, no doubt you are correct. A competing analogy to me is the art of forecasting – it’s as much an art as it is science. There is no substitue for hands on knowledege – In loco parentage.

  7. Dead solid perfect Dave

  8. I often find your advice applicable not only to business but to life in general. Its like climbing a mountain. We may be taking different paths and even climbing different mountains but there are knowledge, skills and wisdom that we can learn from each other. As someone once said Luck, Where Preparation and Opportunity Meet”. You provide your readers important climbing gear.

    BrianDRPM

  9. I often find your advice applicable not only to business but to life in general. Its like climbing a mountain. We may be taking different paths and even climbing different mountains but there are knowledge, skills and wisdom that we can learn from each other. As someone once said “Luck, Where Preparation and Opportunity Meet”. You provide your readers important climbing gear.

    BrianDRPM

  10. Would really like hearing from a few business owners out there who really went with their gut instincts and how successful they where after doing so. I do agree that you go with that “inner voice”.

  11. I think you need to combine a little of both gut instinct and planning in any business decision. You need to trust your intuition but a little planning is involved too.