Growing Your Business by Knowing When and How to Expand
What signs or activity suggest that it may be time to start growing your business? Startup founders and other solo entrepreneurs are often consumed with tending to specific operations like finding employees for an immediate need. Or they reach a certain business plateau, where things appear to be running smoothly, and they may become complacent about the future.
Whatever the reason may be, you should keep the growth potential of your business in mind and prepare for opportunities as they arise. By learning how to grow your business in carefully planned stages, you could be in a better position to accomplish the goals you have in mind for your organization. Consider the following questions:
When should I grow my business?
Pay attention to the signs. A range of factors are involved in deciding when to grow your business, but among the most important are:
Demand exceeds supply. You may find that sales are increasing dramatically, but your business lacks the infrastructure to contend with rising demand. This comes with the risk that you lose revenue because the supply (and the process for generating supply) may not be there.
Customer response. If you consistently hear from customers, "Why don't you also offer X?" or "I'd be interested in buying more if you could upgrade your current products," it behooves you to heed these comments and plan accordingly.
Stagnation has set in. Contrary to the two reasons above, if your business undergoes extended periods of little or no changes, it may be because you've settled into a comfortable routine. But even the best-established routine can collapse due to unforeseen events, such as a new competitor coming into the market.
How can I successfully grow a small business?
Expand your customer base. Gaining more customers is a key driver of business growth. A solid, long-term marketing plan can help you attract new business and reinforce customer loyalty. Offer a rewards program to keep your current customers coming back and consider asking for referrals. To help new customers find your company and learn about what you do, expand your online presence with an updated website or the use of social media.
Scale for growth. What can you do to send sales skyrocketing in the months and years to come? Prepare for growth with a solid plan and build the infrastructure to handle an increase in business before it happens. This includes automating processes to gain efficiency and investing in the tools you need to handle an increase in volume. However, an influx of revenue based on your company's ability to generate more products and sales may not instantly translate into greater profits. Growth can be costly in terms of expanded technology, more employees, increased overhead, etc. Expect these costs to eat into your projected profit margin in the short-term, while keeping an eye on your long-term goals.
Increase hiring. If you're planning for future growth, consider recruiting and hiring. Adjust your hiring processes to identify individuals who demonstrate the aptitude and skill sets you can count on. This includes candidates who demonstrate enthusiasm for learning and expanding the range of their skills, as well as those who can offer concrete ideas about opportunities for growth (and have the talents to meet the need for greater responsibility down the road).
How do I build a company poised for growth?
Create standardized workflow documents. It's a good idea that each aspect of your business operations be documented, meaning all of the protocols and procedures needed to get a specific job done should be in writing somewhere. A comprehensive file of workflow documents may help ensure that, as individual employees come and go, there's a standard procedure in place that new staff can quickly grasp and master. If you take on new customers and need to boost the workforce in a hurry, you'll be glad these documents are there.
Upgrade your technology. Whatever data storage and communication system you've had up until now might not be able to meet the demands of scaling your business. Cloud-based systems are designed to handle a significant increase in data storage and communications, but with effective built-in security features as well. A human capital management cloud solution, for example, may help:
- Increase employee access and participation;
- Reduce expenses through a streamlined infrastructure; and
- Provide a centralized database of considerable use for businesses with geographically diverse locations.
Seek outside assistance. For many small businesses, another effective method to handle rapid growth is benefiting from the wisdom of a seasoned advisory board. Consulting this group can be a great way to obtain the advice on how to grow the business without incurring additional costs. Also, you may find that you don't have time to complete administrative processes like payroll in-house, as they only become more complex as your company grows. It may be time for you to consider bringing in a third-party administrator to handle your payroll processing and benefits.
Challenges to look for as your company grows
Planning for economies of scale doesn't necessarily guarantee you'll successfully achieve that goal — at least, not right away. In the meantime, growth-related glitches, operational errors, and supply chain mishaps can damage your competitive edge. That's why planning ahead is so critical.
Here are five challenges you should anticipate when expanding your business, or warning signs that your business may have already expanded too much or too fast.
1. Budget allocations fall short
Expansion costs money, whether it's spent on revamping a business website or opening a second retail location for a brick-and-mortar enterprise. There are plenty of up-front expenses you may need to consider, such as:
- Additional marketing so existing customers know about the online expansion or second store location
- The need to hire and train new staff
- Leasing/rental costs for a second location
These and other unanticipated expenses may impact your cash flow situation, and if you spend more than you take in there could be trouble ahead — particularly if you're obliged to borrow funds and assume additional debt. Remember, the road to success might have some ups and downs and make sure you have enough liquidity to cover fluctuations in cash flow. Also, be sure to compile a detailed cost-benefit analysis before taking further steps toward expansion.
2. Your employees can't keep up
The staff you hired at an earlier business stage may not be equipped to take on new growth demands in terms of productivity and customer service. Through no fault of their own, a rapid expansion can mean many added hours on the job which may contribute to increased stress, and a drop in morale and performance. No business can afford such negative consequences for very long. While you're working on hiring and training additional employees, do n't forget to reward those who've stuck with you through the ups and downs and contributed to the company's success.
3. Your vendors fall behind in fulfilling orders
Without some advance warning, your vendors and suppliers might not be prepared to handle a surge in demand from your business. If they're unable to keep pace with your need for raw materials and related resources, you could see the consequences in delayed product delivery to customers and a lapse in quality control. Keeping an open line of communication with your suppliers can help to ease the transition in your business partnerships as your company grows.
4. Customers start defecting
Another unwelcome sign of overly hasty expansion can be a loss of customers. If orders go unfulfilled and quality suffers, your once-loyal customers won't hesitate to start exploring opportunities with competitors. Be on the lookout for a spike in customer complaints — a sign that your business is not meeting customer needs as it once did. If needed, dedicate an employee to quality control to ensure that you're meeting the desired standards for your product.
5. Too many demands on your own time and resources
If you thought you were busy with your startup venture or first retail location, wait until you pull the trigger on business expansion. Some business owners may even look back with fondness on an 80-hour workweek. Keeping up with growing demand can be just about impossible without additional resources and manpower. Although you may be accustomed to doing it all on your own, you may need to learn how to delegate responsibilities to help the business grow effectively. Otherwise, you could potentially burn yourself out and put the entire enterprise at risk.
There's a lot to consider before committing to growing your business, but what really matters is not putting it off for a later date. Most successful businesses need to grow at some point. The key is anticipating potential problems and planning how to deal with them before they arise. Develop a strategy and consider using automation tools and technology to help streamline your processes and meet growth opportunities.