It’s natural when you’re running a business, wanting to seize every chance to expand. Expansion means more customers, more revenue, and a stronger, more powerful business. Is it always a good idea, though? The expansion comes with a large degree of risk, and if you can’t manage that risk effectively, your expansion aims might end in devastating failure. Today we’re taking a look at why expansion might not be the best idea in every case and how you can judge if the time is right.
Risks of Expansion
The primary risk of expansion is that you’re going to overextend yourself financially. Expanding your business, whether that means opening new branches, adding new products to your line, or simply hiring new staff members, is a costly enterprise, and you need to be able to absorb that cost until your expansion can begin to pay its way. If you’ve underestimated your ability to fund your expansion, whether that’s with money in the bank, finance from investors, or taking profit from your regular revenue stream, then you could find yourself stretched, with your expansion efforts overbalancing your original, stable business.
There are other dangers, though: a public, visible failure can have a dramatic negative effect on your reputation. Your judgment looks bad; if you’ve caused job losses, you could have soured the public on your brand; if you’re an expertise-based company providing consultancy services or accounting expertise, then a failed expansion effort calls into question all the rest of the advice you have to give.
The best thing you can do is ensure you’re prepared for what you’re planning. Market research at home and international research abroad can help you understand the people you’re selling to, ensuring your brand offers helpful solutions at a price they’re happy to pay. Armed with your market research, you need to ensure your plans follow the facts, rather than vice versa. Work with the projections your fresh insight into your market give you: budget around the amount you can conservatively expect to make, not what you’d like to believe is possible, and you should avoid the worst risk of financial and reputational damage and grow successfully, for the long term.