Last week, we looked at signs that a business is ready for expansion. Expansion can be a very exciting, but also a successful step for your business. However, it may not always be the best option for you at that time. There are many disadvantages and risks associated with business growth, which you must fully consider before deciding whether to move forward with expansion or not.
Why Business Growth and Expansion Might Not Be The Best Idea
The potential gains arising from a successful business expansion are plentiful. However, each attempt at expansion, no matter the company, comes with a big element of risk which could end up destroying the business altogether. In fact, business over-expansion is a well-known leading cause of business failure. People have a tendency of rushing things; when it comes to business expansion, patience really is a key virtue.
Business growth leads to a set of whole new opportunities for an organisation. However, it also leads to a whole new set of problems. Growth means increased responsibility for you and your employees. You may be up to the task of handling this but your employees might not. After all, it is not their dream they are pursuing with this business. Expansion almost always leads to larger numbers of staff. With a growing workforce comes thoughts with how you can deal with benefits, employee holidays, payroll and payroll taxes, absenteeism etc.
What adds to the problems from an increased workforce is communication. However, much the business expands, you remain commander and chief. As such, you need to maintain effective and accessible lines of communication with your ever-growing workforce. A Monday morning ‘team meeting’ may no longer be doable with the size of the workforce, as well as if you have employees at multiple locations.
On the product side, business growth can have a lot of negatives. Expansion can lead to a short term loss of quality, something your customers may not be happy with. You need to ensure you have the finances to fund the expansion. This can be a big problem if things go over the budget, you face delays or poor planning. If the expansion is large enough, it may require other members of the organisation to oversee different aspects of expansion. This can lead to an overall loss of control of the business.
Ways to Postpone Expansion
The prospects of getting expansion wrong are daunting. But if you or your organisation really are reaching the limits of what it can do at its current capacity, there is an alternative to expansion. This largely compromises optimising your current business practices, to get the most gains out of what you already have.
Firstly, you can work on making the business produce less waste. This can be difficult to achieve and requires work to be put in, but it can really affect your organisations efficiency and financial gains. Analyse your processes, look at the ins, outs and wastes of your procedures and find out ways to reduce the waste to increase the output. Methods such as 5s and lean six sigma are good ways to analyse and facilitate waste reduction techniques in your organisation.
Look for avenues to enhance digitalisation. An example would be a physical documenting system. These are very inefficient and consume large amounts of space. A digital, computerised archive would use less space and allow employees to manoeuvre documents much more quickly.
If there is a need for more responsibilities to be handed out to staff, instead of hiring new people try to allocate tasks to existing staff. This may not be popular if they already have a strong workload, but can be useful if employees have free time to spare. This may also require enhanced training for the employees to take on the responsibility.
Lastly, if you need to deliver more of your product to customers, why not licence your products to others. This is much less risky than expanding the business and you will still receive royalty payments from each sale.