To grow or not to grow is a decision most successful small businesses face at some point. There can be opportunity and profit in growth, but there can be perils and risks as well. What should you as a business owner consider when you are faced with this important decision?
First, analyze the potential benefits of expanding your business.
- The business can often achieve attractive economies of scale from increased buying power and operational efficiency. This can often reduce your cost structure and improve your margins. Growing your margins at a faster rate than your sales growth can achieve remarkable financial results.
- Growing organizations can often attract more skilled employees who prefer larger organizations with more opportunities for promotion and development.
- Growing organizations generally have a greater opportunity to go public.
Next, take a look at the risks your business faces if you expand operations.
- Larger organizations typically require more elaborate systems and tend to be less personal than smaller companies. As it grows, the business will probably have a more rigid management structure.
- Increased complexity can result as operational issues tend to expand faster than anticipated. Operating remote locations can be very challenging.
- Loss of control may be a consequence of expanded operations. Growing companies face significant integration changes, and developing capable managers can be difficult.
For help in analyzing your company’s situation, please talk to us. We can help you weigh the benefits and risks of expanding your business.