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Business Expansion: 4 Things to Avoid for Smoother Growth

Expansion is a necessary part of running a business. A company that isn’t growing and doesn’t have sufficient pricing power to raise its prices with inflation is losing ground. But that’s not all. As the saying goes, “You’re either growing or you’re shrinking”, and that’s absolutely true.

With that said, smoother growth without excessive growing pains or bumps in the road is preferred. While they’ll always be plenty of surprises, when it’s planned better, they’re manageable.

Here are four things to avoid for less tumultuous business expansion.

Growth at Any Cost

Companies chew through funds when attempting to grow. The amount of operating capital must necessarily expand to cope with the increasing demands for it.

When pursuing reckless or unsustainable growth without controls in place, the business can get starved of available cash. Growing usually requires considerable upfront expenditure to do so. This can be for machinery and other equipment, truck finance, larger offices or warehouses or factories, and an expanding employee counts too. Many of these are paid upfront with the hoped-for increased sales arriving months or years later.

Growth must be planned out to ensure that expenditure to fuel it doesn’t create cash-flow problems before the sales revenues materialize.

Overpaying for Finance

Many companies require funding or lending of one sort of another.

When operating a truck fleet to support your business venture, then obtaining one or more truck loans is often done, as this article on expanding a fleet explains. Using a truck finance broker like AGM finance is generally a good idea because it helps the company retain the funds that would otherwise be used to make the purchase outright.

By getting financing for what’s needed and using a business lender that specializes in that type, it’s often possible to increase the approval rate. Also, because they’re used to business lending of this type, they’re often more affordable for the interest rate.

Not Testing/Researching the Market First

Unless you’re growing your involvement in an existing market, expansion may take the business into new markets.

To avoid investing heavily into growth that never arrives, it’s necessary to research the market first. Market testing is useful, but proof that other products or services are already selling well is better. Market research surveys can mislead because what people say they’ll do and what they actually do is not always the same. This is why market proof is better.

Safer expansion means using existing, proven markets that the business is already heavily involved in. Side products, add-ons, and requested new additions to the product line can supply the sought-after growth with less risk.

Having the Wrong People in Place

Expansion requires many of the people that work for the company. Some folks may have been there for years or have worked in the industry for decades but are newer company employees. These may be reluctant to accept the kind of fast-paced change and evolving situation that growth often expects.

It’s often necessary to recruit managers who are more up for the task. If the current leadership has never worked in the industry or has only done so at a low level, then when the heat is on, they may be found wanting. Similarly, other staff members may need to come on board to add to the existing in-house skillset too.

While there will always be bumps in the road, by avoiding some of the potential pitfalls, companies can make growth phases better planned and more sustainable too.