How to Avoid Growing Pains When Your Company Expands
In part two of our Steps to Growth report – Breaking Barriers – we talk to business leaders and experts around Britain and examine the opportunities for growth that exist across a variety of sectors. For an ambitious company, expansion is the natural next step when you’ve achieved some initial success. However, there are a number of pitfalls which can affect your ability to expand successfully. Read on to discover some of the most common growing pains that can impact any business that’s looking to expand.
Choosing the wrong time
When choosing to expand your business, picking the right time is crucial. You may feel that your company is highly successful and that the next logical step is to attempt to break into new markets. This may be the case, but without conducting an objective review of the business in terms of capital and resources, you’ll quickly run into problems when attempting to expand.
If your business has been stable for some time and is outperforming similarly-sized competitors, then it absolutely makes sense to attempt to grow your company. Conversely, if you’re only making marginal profits and don’t have the management and financing in place to ensure expansion is successful, it’s better to wait until you’re in a stronger position.
Expanding too quickly
If business is booming for your company, it can be tempting to expand as quickly as possible. However, expanding too quickly is one of the most common pitfalls for a growing business. Before you commit to expansion, ensure you have the resources - both in terms of raw materials and staff - to support your plans. Attempting to boost sales too quickly can lead to cash flow problems as you dip into profits or seek additional funding to support marketing and production efforts.
Expansion will also have an impact on your existing employees. If you don’t hire adequate numbers to support your expansion plans and place too much pressure on your current staff, the increased workload could lead to dissatisfaction and higher staff turnover. Increased pressure on your employees may also lead to you neglecting existing clients or markets, which can result in you losing the customer base which provided your initial success. A sudden increase in customer complaints is one of the classic signs that you’re expanding too quickly and have compromised quality. Conversely, if you hire too many staff too quickly you can run into difficulties if the market is unable to support that level of growth.
Unfamiliarity with the market
When expanding into a new market, particularly a foreign one, it’s vital that you have a full understanding of the cultural and economic differences between it and your existing marketplace. You will need to consider general economic trends, currency exchange rates, religious and lifestyle issues, as well as access to resources and raw materials you may need for production. You may also encounter language, supplier, or cultural difficulties which will impact your ability to expand.
Remember, any existing market research will not apply to this new market. You should conduct thorough research to determine whether there is a demand for your product in the new market and you’ll also need to determine the right media channels to promote it. Of course, having a consistent and recognisable brand is important, but subtle adjustments may be required to suit new markets, so the tone and content of marketing messages and even packaging may need to be altered. Your price proposition may also need to change, depending on economic factors in the new market.
Inability to delegate
When expanding your business, you will eventually reach a point where you’re no longer able to oversee every decision yourself. At this juncture, it’s vital that you have management in place who you are comfortable delegating important business decisions to. If you’ve hired the wrong people, or you don’t place sufficient trust in the people you have hired, you’ll find it difficult to expand your company effectively. Delegation doesn’t mean you have to cede all your authority, you’ll still be the one making the larger strategic decisions, but it does mean you’ll be much more flexible and agile when solving the kind of everyday problems that arise during expansion.
Having unrealistic expectations
There will always be limits on your capacity for growth. You may initially be part of a rapidly-growing industry, but the opportunities for further expansion will eventually decrease. At this point, you should consolidate your existing business rather than attempt to force unnecessary expansion that will generate increasingly small returns. Remember, increasing your sales and breaking into new markets is not the only barometer for success. Pick the right time, proceed carefully, and conduct thorough research before you attempt to expand your business.
How are you planning to grow your business in 2016? Let us know in the comments.
And read the full Steps to Growth: Breaking Barriers report at https://aibgb.co.uk/breaking-barriers