For many business owners, choosing whether or not to expand is one of the most important decisions you can make. Here are considerations you should take into account when considering business expansion.
If you’re a small business owner with a single location, you have complete control over your business. As you get bigger, however, it can be harder, if not impossible, to oversee every situation personally.
If you add a new location or even just expand your current one, you may have to trust others to run certain aspects of the business. There’s a clear trade-off here. The bigger you get, the less you can be on top of every aspect of your business.
That can make it hard to make the decision to grow. You have to balance a desire to make more money/own a larger company with the fact that you will lose some ability to be hands-on and control every facet of the company.
Do you have the people?
In many ways, the decision to grow comes down to whether you have — or can hire — the right people. Sometimes it makes sense to add a location, because then you have someone working under you who is ready to run his or her own operation.
That, of course, presents a risk as well. If you expand based on one good employee, you give that worker a lot of leverage. You should consider incentivizing that person to tie their compensation to the success of your new endeavor — you’ll want him or her to have enough upside so they can’t be easily stolen away.
Is the opportunity there?
Sometimes a business works because it has a history in a certain location. A local pizza shop, for example, may be an ingrained part of one neighborhood but a totally unknown entity a few towns over.
If you’re considering expanding, it’s important to really examine the market and the potential opportunity. Can you duplicate what you already do in another location? What will it cost to establish yourself in a new market? Who are the established players, and how does the community feel about them?
In many ways, you want to think about being a good citizen. If you bring a second dry cleaner into a market that already has one, is there enough business the both of you? If there isn’t, your entering the market could mean that not only will you fail, you may ruin a successful business and leave the community without that needed service.
Can you handle it?
If you started your business and have run every aspect of it yourself, you need to really think about how expanding will impact you. Can you give up some control? Are you willing to work harder if you’re not willing to let someone else make key decisions?
It’s not always easy to put your fate into the hands of another person. If you’re going to do that, it’s important to set parameters and stick by them. Decide what level of decision requires your input and where your manager can make the call without you. You don’t want to pass up a major opportunity because you’re being unreasonable about control. On the other hand, expanding when you don’t have the right people can be a recipe for disaster.
Growing can mean making more money, but it can also mean added stress, and sometimes it can make a successful company fail. Before you make the call, truly evaluate the opportunity and only do it if you have all the pieces in place, along with a personal willingness to do what’s needed.
Readers should consult their own attorneys or other advisors regarding any financial or business strategies mentioned in this article. These materials are for informational purposes only and do not necessarily reflect the views or endorsement of Santander Bank.
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