A growing business is exciting. As you use your current resources to meet increasing demand, though, there comes a time when you can’t just grow organically anymore. You need to expand thoughtfully.
The difference lies in the momentum behind each action. Growth signifies an increase in customer demand. Expanding your business is a purposeful decision to escalate and add to business capabilities. The fact that you have more control over the latter may make it feel like a less intimidating activity — but don’t be fooled. Expansion can come with a variety of both seen and unforeseen difficulties.
In this article, we’ll explore the top reasons why business expansion can be more difficult than expected. Use these tips to prepare you for the hurdles ahead and equip yourself with strategies, tactics and techniques to overcome them.
1. The challenge of scaling operations
When your business is initially growing, you can handle scaling elements with your resources. Once you reach limits in those areas, though, you need to expand how your company operates. From fiscal activity to administrative elements to supply chains and production, you need to figure out how to serve more people without losing your competitive advantage.
Sales is one area that is a great example of how scaling can unexpectedly go wrong. As you push your products and services out to a larger crowd, you may need to establish new promotional partnerships. This could come in the form of a retailer, vendor, or franchisee.
According to Brian Cook, franchisor of Get in Shape for Women, “When you introduce your product to franchisees, you have to treat them as investors in your product. They’re not adapting, modifying, or ‘mom-and-pop’-ing your product; they’re taking a well-defined system and getting it out into the world.”
The takeaway: As you consider how to scale your operations, build partnerships that can sustain your growth. If you find you can’t trust your partners as investors who are integral to your sustained growth, you may need to change your approach — or look for better options.
2. The challenge of maintaining quality control
Your standards are what set you apart as a business. What those standards are can vary. Walmart, for instance, had a high standard for supply chain efficiency. Apple’s standards focused on product quality. Grocery store chain Wegmans has a reputation for only accepting the best fresh fruit products — president Colleen Wegman says “high standards” are a core value of the company.
Brian Cook addresses the concept of standards, as well. When it comes to scaling without losing quality, he says, “Don’t keep what you can’t scale. Avoid new products, customizations, or offerings that can’t be replicated throughout your entire system. Otherwise, you risk disappointing customers by delivering an inconsistent experience.” In Cook’s case, he’s referring to franchising, which admittedly has a more rigorous formula. However, the concept applies to any form of expansion.
The takeaway: Don’t ship new vendors nuanced products without equipping them with the knowledge to sell them. Don’t work with new suppliers if you don’t know they can deliver precisely what you need consistently and at a high quality.
3. The challenge of navigating new markets
A key part of business expansion is the purposeful pursuit of new audiences and markets. Everyone likes to talk about the research part of this process, and that is definitely an important first step. However, the less anticipated part is putting a new market strategy into action.
UK commercial finance and banking industry journal Business Money lists five strategies, the first two of which involve market research and developing a tailored market entry plan. From there, you put action behind words, with the last three strategies including:
- Adapting your products to meet local expectations and demands: How can you uniquely solve problems with your new target audience’s pain points?
- Establishing strategic alliances: This harkens back to reason 1. As you scale, are you building partnerships that function as investors in your expanding brand?
- Overcoming cultural differences and customs: How is your new market different from your current one? For instance, if you’re selling food products, will your new audience have a different emphasis on things like nutrition or sustainability?
The takeaway: New markets are a key part of sustained growth. But don’t underestimate how challenging it can be to gain market share in these areas. Do your homework and then put together a plan that includes a clear strategy for execution, assessment, and adaptation as you go.
4. The challenge of managing increased financial pressures
Business is expensive. But are you ready for the slew of additional costs that come with expansion?
As you seek a purposeful increase in your business capabilities, it will not just scale your costs. It will add to them. You might find that you need to go from renting to buying a dedicated warehouse, hire a position you previously kept in house, or work with an agency that you didn’t need before.
The U.S. Chamber of Commerce recommends that you prepare for these incoming increases in financial expenses by budgeting in depth to cover everything from marketing and staffing to new equipment and workspaces.
They also emphasize the importance of healthy cash flow, explaining, “Your existing cash flow may not give you enough to cover all your costs, but it should help provide a financial safety net for investment and growth.”
The takeaway: As you consider expansion, look for every financial element that will add to your budget. You don’t have to have everything perfect, but make sure you have plenty of runway to work with.
Expanding your business
Building a business isn’t easy — and the challenges aren’t all in the startup phase, either. If you are feeling good about your growth, that’s great! Use that energy to expand your business.
Just remember to do so thoughtfully. From scaling to quality control, new markets to increased financial pressure, make sure you have all of your ducks in a row before expanding your business.
