Seven Tips For Managing Expansion Successfully

Growth Tree - Words on Branches Symbolize Organic GrowingSo you’ve formulated a business plan, chosen your company structure and raised the cash needed to fuel your micro businesses growth. Expansion is in sight. All that was tough enough but it’s just about to get trickier…now you’ve got to actually manage the process.

In many ways it’s a balancing act. Should you be overzealous, you could end up doing your business more damage than good. Equally, should you be too cautious, you could end up ruining missed opportunities.

You could probably do with a helping hand. So, with that in mind, if you’re currently in the process of expansion or have aspirations to expand, here’s some tips…

1.  First up, ensure that you’ve built to scale from the beginning

Scalability is integral to expansion. Every aspect of your micro business will need to be capable of both coping and performing under an increased or expanding workload. Should it not be, then this could have dire repercussions later down the line.

Before you set about expanding, examine every facet of your micro business and try to ensure that it can cope with the growth process. Look at things like your IT and if your software isn’t already largely cloud based, consider switching to it.  These systems are normally more capable at handling expansion whilst much of this web-based software charges a monthly price per user, thus avoiding some of the outlays on software and servers that would be required in-house.

2.  Draw upon your market research throughout

I don’t mean literally by the way, although a little bit of doodling might prove nice respite from all the expansion stress.

What I’m getting at here is the importance of maintaining market awareness. Try to update your market research consistently, as this will help better inform your planning and decision making throughout the process. You’ll be able to act on competitor shortcomings and the opportunities the market offers infinitely better.

3.  Bring aboard financial advice

With expansion comes financial implications, the bigger the expansion, the bigger they’re likely to be.

It’s therefore wise to call upon whatever financial advice you can, be that via your bank, accountant or your various investors. Their expertise can help considerably, drawing attention to the various implications expansion can bring to cash flow and such. Don’t be afraid to pick up the phone and give them a call, after all, they should be there to help.

4.  Exploit economies of scale

If you’re new to the term, essentially economies of scale are the cost advantages a business can obtain along with expansion.

At the simplest level and probably the most applicable to an expanding micro business, is the potential to bulk buy. By purchasing large quantities of goods or capital to meet increased demand, costs can be significantly reduced. The implication of this can of course be higher profit margins that can be injected back into the business.

5.  Equally, try to counter diseconomies of scale

Conversely, you’ll also need to be aware of diseconomies of scale and the impact these can have on your micro business.

On the whole, these are generally more pronounced in big business, but, that said, smaller businesses can experience them too. Try to ensure that the various facets of your business, be that employees, IT or machinery, are all producing efficiently. Not too little or not too much, and this problem should be avoided. Keep a keen eye on every aspect of your business and review them continually.

6.  With that in mind, don’t over-expand

Diseconomies of scale often result from over-expansion, owners and entrepreneurs becoming overzealous and letting their ambition get the better of them.

Over-expanding can be fatal should you expand beyond the financial capacity of the business, so again if you’ve got any niggling doubts or worries speak to a financial advisor. Ensure the demand is there for you product or service and ideally, expand gradually and in line with demand. Elsewhere, don’t lose control of your business from a managerial perspective, as it’s imperative for you to have an idea of what exactly is going on.

7.  Lastly, If possible, outsource or bring in specialists   

As part of expansion, you’ll likely need to bring in extra staff. To reduce the stress and ensure you’re well equipped to deal with the process, try to ensure that these new staff can bring expertise in certain areas.

Largely, it’ll depend upon the nature of your business but bringing in specific staff to deal with HR and operations can greatly assist in the expansion process, taking certain worries out of your hands and allowing you to focus more of your energies on growing your burgeoning business. If you can’t afford a new full time member of staff, outsource, as there’s an abundance of freelancers out there who can help.

Today’s Micro Action micro business action

What considerations do you need to take into account as you embark upon your micro business expansion? Make some notes and actions based on what you have read in today’s article – you may identify some additional factors to include.

Mark James

Mark James is an in-house Writer for Crunch, accountants for contractors. He specialises in small business and has aspirations of his own start-up one day.

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  1. I agree completely with the need to focus on financing, scalability and the need not to overreach.

    As a Business Growth Adviser, Mentor, Trainer I see too many businesses that just focus on building sales rapidly and quickly run out of cash due to overtrading.

    Also without a proper business plan there is minimal or zero tracking of costs against budgets and forecasts. Then often follows an inability to fulfil the orders within a promised delivery time and quality also drops.

    Before embarking on a growth strategy take advice and get some mentoring in place. This will save heartache and failure in the long run!
    Alan Briggs recently posted..Merry Christmas & Happy New Year 2013My Profile

  2. Agree with the additional points Alan!

    Bringing in outside expertise is definitely worthwhile. Fresh perspectives and expert opinion can be hugely beneficial, especially if it’s your first venture.
    Mark James recently posted..IR35 investigations may be on the upMy Profile

  3. I’d say the hardest part from a business owner perspective is the switch from doing to managing. It’s a very different process when you’re the one doing everything to outsourcing and possibly hiring staff to do it. I’m planning my business to scale while retaining the same service and feel – very important to me – and it’ll need an innovative structure. Lots of observation is good, and that includes how I work!
    Rosie Slosek recently posted..Grow your business: put yourself in the path of opportunitiesMy Profile

  4. As your business grow, it will surely need all the help it can get. Outsourcing at times help as they say you have to work smart these days and not harder. You just have to tap on the right resources as you scale your business up.

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