The Pros & Cons Of Expanding Your Small Business

Starting a small business is kind of like having a baby – sort of. When you have a business, you want to take care of it, you want to give it all your love and attention, and you want to nurture it so it can grow and be successful. You can see how this is similar to having a child!

Growth and expansion are seen as the natural steps to take when your small business enjoys success. You’re making lots of money, but you want to make even more. Now’s the time to grow your small company and take over the world.

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Sadly, it’s not as simple as that. Growing a business is tough. There’s a lot to consider and weigh up before you choose to expand your company. In the long-run, you should all aim for growth. However, there may be times where you have to hold back just a little while longer for the good of your business.

So, how do you know when it’s time to grow or not? I can’t tell you this, but I can tell you some of the pros and cons of expanding your small business. By doing this, you’ll know what to expect – and you can weigh up whether or not an expansion will work for you right now.

Pro: Enter new markets

Most business professionals choose to expand because they want to enter new markets. This means that you find new avenues to explore, and new consumers to tap into. If you don’t grow your business, then you miss out on these opportunities.

Expanding your company could mean that you invest in new employees that allow you to provide a new service to the public. As a result, a new swarm of customers could be at your fingertips. These people weren’t too interested in what you previously offered, but your new product/service appeals to them. Therefore, you could generate more customer growth.

Pro: Increase revenue

Another reason to grow your business is the potential to increase your revenue. If we lead on from the previous point, then you can see how this is possible. More customers mean more sales, and more sales mean more revenue. Of course, by growing your company and offering more services or tapping into new markets, then you open up new streams of revenue.

So, technically speaking, you could make more money by growing your organization. Remember, this only takes into account the money you bring into your business. We’re talking about revenue/income here, not profits. While you could increase your profit margins by expanding your company, there’s never a guarantee. This is because of the possible costs of growing your business – which we’ll go over later on.

Pro: Boost your reputation

As a small business, you’re almost looked down on by other companies. You’re the fresh-faced kid in school that nobody takes seriously. But, what happens when that little kid starts working out and goes through a growth spurt? Suddenly, they’re much bigger than they were, and everyone starts respecting them. The same thing happens when your business gets bigger – people take more notice of you.

As you grow, you may invest in more marketing materials to get your name out there. You open up chains in different locations, spreading the word about your company. All of a sudden, more people know you exist. You’re no longer a small organization that’s confined to a very local area of the country. Instead, people nationwide know about your business – and maybe even people all over the world! This raises your profile and boosts your reputation. As a consequence, your reputation can help you reel in even more customers. This leads us back to square one – more customers, more money!

Con: More competition

Now, one of the downsides of growing a business is that you open the doors for more competition to come in. As a local company, you have a small group of businesses to contend with. In some cases, you may be the only organization that offers your service within a particular area. So, you don’t have to deal with much competition at all!

But, when you expand into new markets and reach new consumers, you end up with more rivals. If you open a chain in a different area, you now compete with the companies that serve this area. It’s simple business mechanics, and this is why a lot of small businesses fail when they expand too early. You’re not prepared for the competition, and you haven’t done enough research. Make sure you check what you’re up against and adjust your company to ensure you still offer a USP that sets you apart from the rest.

Con: Harder to communicate with employees

When you start your business, you may have a handful of employees. You can count them all on your fingers, and it’s easy to communicate with them. You all work in the same place, so it’s just a case of calling them over when you need to chat.

Things change when your business gets bigger. Suddenly, you have way more employees – some of which might work in a different location to you. Now, you have the issue of trying to communicate with all of them. It’s harder, but if you read Communication In A Multi-Location, Multi-Team, Multi-Project Business, you’ll see that you can do it. Various technologies allow us to communicate with people all over the world. It’s seamless, and you should be able to keep in touch with all your employees. You’ll still find it more challenging than before, but it’s not like you’ll be completely shut out.

Con: Expensive

Expanding a company isn’t cheap. If you look at everything we’ve discussed – including the pros and cons – you’ll notice they all come with a price. Sure, you can tap into new markets, but this means pumping money into your business to reach new areas and find new customers. Yes, this could lead to a reputation increase and more revenue, but how much does it cost to get your business to a place where you start making more sales?

You’ve got more competition, so you need to invest money to research them and ensure you beat them. Even something seemingly simple, like setting up new communication methods will cost money. When you add everything up, you could get a horrible surprise. Despite your good intentions, expanding your business cost too much money. Now, you have increased pressure to generate loads of revenue if you’re going to sustain this growth. As I said before, this is why a lot of companies fail!

So, you shouldn’t grow your business?

To wrap things up, we need to look at the overall message in this article. It’s easy to look at this and think that I’m trying to persuade you to avoid growing your small business. That couldn’t be further from the truth. Growth is good, but only what the time is right.

I want you to think twice about expanding your small business after enjoying a bit of success. Sure, you can get excited and want to enter new markets and make yourself bigger, but it might not be the right move for you. Think about the downsides of growing a business – mainly the costs! Work out if you can feasibly build your company without entering a perilous financial position. If the money adds up – and you’re confident you can afford an expansion – then go for it. If not, then give it a few months or years until you’re ready to grow without any problems.

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