The Advantages and Disadvantages of Expanding Your Small Business
How To Know If You Are Ready To Expand Your Business
You have a strong team
In order to expand your company, you will need a strong workforce who are reliable, productive and eager to progress the business with you. You must ensure that you have the necessary team members in place, you may need to recruit new people to ensure that you can meet increased demands and expand your offering. Expanding the business can put added responsibility and pressure on existing team members. It is important that your team have good working relationships with one another and will be happy to support each other through the changes.
You have a loyal customer base
You must ensure that your business is in a position where growth is actually possible and sensible. If your current customers are in minimal numbers and you experience low levels of ‘repeat purchase’ then you should be investing time and resources into increasing the satisfaction of your current customers. Increasing your rates of production and the size of your team does not mean that your customer base will increase. You must only grow your business when you know that the demand for your product or service is confidently on the rise.
You have capital in place
Expanding your business can be expensive. You should not start expansion activities unless you have savings and capital in place to fund the growth. It isn’t recommended to rely on the turnover you will expect to make on future sales, it is much safer to have the funds ready and in place.
You are eager to grow
Growing your business requires lots of commitment and dedication. You will also be taking several risks, investing capital to fund the growth and making changes to the operations of your business; you must be willing to take these risks. If you are not completely motivated and excited by the prospect of growing your business then maybe now is not yet the right time.
Pros And Cons Of Expanding Your Small Business
Potential for increased profits
Taking your business to the next level can allow you to increase sales and generate more turnover. If you are increasing your production, you may find opportunities to achieve ‘economies of scale’ and therefore increase your profit margins on each product or service you sell.
Potential for further growth
When growing your business, it is likely that more and more people will start to recognize your brand, there is a potential to unlock new opportunities such as acquiring investors and mentors to help fuel further development.
Higher costs
Expanding your business can be highly costly. You will see increases in various expenses such as materials, production and human resources. It is likely that you will require a bigger workspace and will spend more time operating in the workspace, leading to increases in your constellation energy bill.
Potential for a loss of control
Sometimes people report feeling increased stress, and a loss of control over their brand once they have decided to increase the size of the business. If your business grows consistently and catches the attention of external parties, you could find that people want to invest in your business and have involvement in the decision-making. If your team escalates, it can alter the relationships of the workforce and communication styles can start to become less personal.
Tips To Expand Your Business
Make growth plans
To stay in control of the growth of your business, you should keep clear plans that include financial forecasts and your desired goals. Your growth plans should involve contingency plans so you are better prepared to deal with unforeseen circumstances.
Invest in systems When your business grows, you will need more help to manage the operations. You should invest in systems to support the different business functions such as the internal communications model, information processing and business data.
