Your small business is ticking along nicely. In fact it’s doing much better than that – it’s flying. Now you’re faced with the next big decision: should I expand? You may see an opportunity to push up your revenues and to expand your firm, but moving into a new product line or market is always risky.
You need to ask yourself several questions before you decide:
Can you delegate to grow?
Most entrepreneurs love being at the heart of their businesses. After all, they set it up so they know the firm inside out and they expect to be involved in every decision affecting it. That’s fine, but if everything has to go through you that can put a brake on your company’s growth.
For your new venture to succeed you will need to devote a lot of time and attention to it. But it’s unlikely you will be able to do that if you insist on being in control of everything. After all, there are only 24 hours in every day – and for some of those you’ll need to sleep. At some point you need to ask yourself whether you are willing to cede a little control to enable your business to expand. If you don’t want to give up any power but you still want to press ahead with expansion, then the chances are that you might make a mess of it.
Is your golden growth opportunity just a flash in the pan?
One of my university lecturers used to be a company auditor before she turned to teaching. She told us that many small businesses would fall into the same trap: at first, the companies would be relatively small, but their bosses were ambitious; when she returned a couple of years later the companies had quickly expanded on the back of a jump in sales. The bosses had bought larger houses and better cars – their lifestyles had risen in line with sales. But many of these firms would go bust within 12 months of her second visit – because their owners had made the fatal mistake of thinking that a short-lived sales spike was a long-term trend.
Can you repeat your success?
Don’t think that just because your existing customers happily buy one product from you that they will necessarily buy something new from you. They might be very happy buying that from another firm. You might need to offer something completely new or different to lure them away from their existing supplier. Or that company might need to do something really stupid to alienate its existing clients, thus enabling you to carve out a niche for yourself in that new market. Either way, you need to understand why your business has been successful and do research to know whether you can replicate that success in a different market or town.
Don’t dilute the magic formula
You need to be careful that by expanding you don’t actually harm your existing business. Plenty of companies that gained a good reputation over several years have grown too fast and, by doing so, have tarnished that image and, in the process, driven away some of their previous customers.
For example, if you take your best sales manager or your top consultant and put them in charge of setting up a new office, you might lose some of your existing accounts, because they are unhappy that they are no longer able to deal with their favourite member of your staff. It’s a risk that many small businesses face.
You need to think carefully about why you want to expand. It can’t be purely about increasing your revenue, because if it is you might lose something intangible that could hurt your turnover, rather than boost it.