To Grow or Not to Grow?

Here’s a scenario for you to picture. Your company has a product that’s in demand. Calls and orders are frequent so you’re getting more business than you can handle. The last thing you want to do is turn new business away to your competitors, but your schedule is almost full with business from your regular customers. Now what? Has the time come to grow your business? Let’s talk about the pros and cons.

We’ll begin on the upside. Three very good reasons for expanding your business are:

First, increased efficiency. As your business grows, business processes are separated, first to individual executives and later to individual departments. Operations, originally in the hands of a few, now go into the hands of many, which means that you are more likely to hire specialists rather than jacks-of-all-trades with miscellaneous job descriptions.

The second reason, increased brand recognition. Customers are drawn to businesses with names they know and trust. Growing your business also better enables you to slip your name brand into niche markets, thereby offering your customers a wider range of your products to choose from.

The third reason to grow is increased potential for landing major contracts. Major customers require suppliers capable of producing high volumes for consistent supply. The larger your production capacity, the more inviting your company looks to the blue-chip customers you want and need.

Expanding sounds like a great idea so far, but now lets look at the downside. Here are three reasons to think twice before expanding:

First, risk. Expanding always costs money. Whether you are hiring new staff, purchasing new equipment, moving into a larger facility or acquiring another business, funding must come from your own capital or from outside loans. In either case, it’s money on the line and money you don‘t want to lose.

The second reason, impact on quality. Growing a business that you have personally nurtured from seed puts operations and processes into the hands of others. Your role, therefore, may become less hands-on and more administrative. Finding people you can trust to ensure the quality of your product may be challenging.

The third reason to reconsider expanding is the potential for overextension. New products that you introduce on the market may siphon off sales from your old ones. In addition, you may be allocating resources to slower-moving products, thereby affecting production and R&D on your cash-cow products.

So, is it time to grow your business? The potential to increase your profits is certainly alluring, but it’s always in your best interest and in your company’s to think twice.