“This is a new business and we need to grow it fast, otherwise we ain’t saying nothing!”
I felt the passion that this partner was speaking with. He is a go-getter and an influencer. He is not happy when things are not “happening.”
His partner, on the other hand, is level-headed, careful but equally passionate about the new business idea.
The reason I was even hearing these statements was that they had agreed to hire me to prepare them for their “big forward thrust.”
I knew before I started that this was going to be a difficult assignment for me.
Yes, small businesses fascinates me. Not so much the type of businesses or the sectors they’re in, but the way an entity grows or fails to grow, purely because of the behaviour of the owner(s).
So when I heard the above statement, my ears pricked up fast because this business was only 6 months old!
Why does this matter?
Perhaps a little story will help…
Not too long ago, a new enterprise opened on a busy street in our little city, Bridgetown.
I thought it was the perfect fit of location, layout and merchandise for the potential customers, who I know would be passing there on their way to the bus stand.
As I expected, the business started doing very well. The store was always busy. It was on the name of the lips of of the target customers, both for the products and service.
Then within about eight months, the owner decided to expand the business. Look out!
Another branch sprung up in another location in the same small town. And another one was opened in an upscale mall. By all accounts, the owner had it going on! She had hit the sweet spot that all new business owners dream of.
Or had she?
What is the problem with expanding a new business?
Well, when you start a business, how you expand it should be part of your original plan. When it’s not, then you must have a good reason to expand it, especially in the short-term.
You cannot suddenly decide to expand or scale a business, at any point in its life, because it is “the thing to do.” Neither can your decision be based on the “envy factor.”
By the “envy factor” I am talking about when your friend started a business since yours, she’s already expanding hers, and you seem to be standing still.
The point is, if you try expanding your new business for any whimsical or ad hoc reason, far from growing it, you just might be sending it to an early grave!
That’s why, what I want to do, is give you just 7 reasons why you should be cautious about attempting to expand your business, too soon into it’s new life.
When you add them to these business solutions, you will be in a good position to grow yourself and your business in the long term.
1. You can stretch yourself too thin
When you originally set up your business, chances are, you did so, based on how much money you had or how much you were able to borrow.
It is also likely that those resources were already limited. So now, you want to grow your business without adding to those resources.
This will result in serious overtrading and lead to your having to borrow more money or worst, close the your new formed entity.
Many small business owners have gone so far as to even mortgage their houses (sometime without telling their partners!) to finance this growth.
This can be a stressful and undesirable situation, not only for you but for your family as well.
2. Your customer service will be affected
When you set out to expand your new company, especially “just because it’s the thing to do” you also impact the level of customer service you provide.
You see, when businesses expand too quickly, the owners are usually unable to hire the required amount and type of staff.
So while you get more customers, they now have to wait longer to be served. In addition, the existing staff is frazzled and frustrated and sometimes outright rude. Naturally this will soon drive away many customers.
If quality is an important factor in delivering your customer service, expanding your recently established business too soon will certainly impact this.
3. The business can lose its intimacy and culture
For most small businesses, an important part of their business model is their size and the intimacy and friendliness of the business.
When you expand too quickly, too early, the culture of the business also changes too quickly, too early, for you, your staff and your customers.
Even when you are able to hire the required staff, you now go from managing a small, intimate team, to managing a bigger impersonal group. Sadly, they might only be interested in their paychecks because they don’t even know what is your vision.
And what if your growth also includes acquiring more space?
Then your customers will not be able to find what they want. They will miss the intimacy and friendliness that attracted them to the business in the first place. As your business loses its character and culture, it will lose its customers as well.
4. You will be forced out of your comfort zone
The one thing that most small business owners miss, when trying to grow their businesses, is this:
A business will only grow at the rate that the owner develops or grows him or herself.
When you rush to expand your new business, you don’t have or can’t make, the time to grow yourself. But at the same time, the new growth needs a new version of you to drive it. This is a serious Catch-22 position.
So, you find yourself completely out of your comfort zone. Yes, you might have heard me declare that stepping out of your comfort zone is necessary for growth…but in this case, it places you right into “heart attack zone.”
5. You could get the risk analysis wrong
One of the important things you must do in setting up or expanding a business is to analyse the risk and identify your risk mitigating factors.
If you grow your new company too quickly, it is highly likely that you will make mistakes with these even if you seek outside help.
Have you taken the time to consider what kind of financial risk you are exposing yourself to in the long-term?
Have you properly analysed what effect inflation and other economic factors could have on your business?
What will happen if anticipated demand falls short of projected sales?
Do you truly understand the context in which you are leading?
6. You could lose your family support
My friend, let’s call him “Russell”, started a business with the blessings and support of his wife and sisters.
The plan was for his wife to delay her return to work for 6 months and help him with his new business. His sisters would help out with caring for their 3 small children.
But in 3 months Russell got an opportunity he could not pass up and everything changed.
Long story short, 18 months later, he was still needing his family support, at the same level as when he started.
Since this was not the deal, a lot of frustration set in.
Eventually, his wife gave him the ultimatum to hire her full-time and pay for proper baby-sitting services or she was walking away…From him and his company.
7. You will likely ignore key business functions
And it’s not like you deliberately want to ignore these key business functions.
But when you decide to expand your new entity very soon after start-up, you really are signing up to ignore key business functions like:
As you can expect, when you ignore these functions, the very growth that you crave is meaningless.
Now over to you to grow your new business…
Right about now, I want to be very clear. It is not my intention to stop you from growing your new business, early in its life.
Don’t think for one moment that if you see a new opportunity soon after you start your business that you should not think about going after it.
However, you need to slow down, breathe, and at proceed with caution.
And here’s the good news.
You now have 7 sound reasons that can serve as signposts to guide you in the right directions. You no longer have to rely on your gut alone.
Use them, please. After all, you did not start a business only to kill it in the name of expansion.
To your new business expansion…