The pros and cons of growing your business

Before seeking out additional sources of capital to scale your business, learn the pros and cons of business growth to develop a deep understanding on how to grow your business wisely and sustainably.

A group of successful entrepreneurs

Business growth is a natural process for most businesses but before embarking on what should be an exciting journey of growth, wise business owners tend to take the time to learn the pros and cons of business growth, set realistic goals, identify any potential issues and develop the appropriate strategies accordingly. In other words, it is about having a good understanding of what business growth is to you and your business, thereby minimising common financial, staffing and legal issues surrounding business growth.

In this article, the business growth specialists at Berley aim to provide a context to understand how businesses can grow and flourish in a competitive environment by sharing:

  • The advantages of business growth
  • The disadvantages of business growth
  • Signs that it is time to grow your business
  • Signs that growth could lead to issues
  • How to overcome potential issues

Pros of business growth

A large percentage of small businesses fund growth through profits which are being invested back to the business or additional cash injections from directors and/or investors. With these extra funds, a business can:

  • Improve current products and/or services.
  • Develop new products and/or services.
  • Hire, train and retain good employees.
  • Attract new customers.
  • Increase sales to existing customers.
  • Have more opportunities to form beneficial partnerships.

In essence, when your business is on a sustainable growth path, it should create a positive feedback loop, where a series of actions lead to a series of positive outcomes, continuously.

Cons of business growth

A business goes through a life cycle of start-up, growth, maturity and exit. In each phase, there are times for growth but there are also situations where growth could lead the business into a downward spiral. Things to watch out are:

  • Pressure to grow could cause business owners to overlook resource availability.
  • Productivity and qualify are likely to drop if management and staff cannot cope with the extra work.
  • Hasty staffing may lead to poor job fit and high turnover.
  • A fast growth may also cause a loss of customer intimacy.
  • The business may become too busy and self-absorbed to notice the changing competitive landscape and customer behaviour.

Entrepreneurs shaking hands

Signs that it is time to grow your business

As business growth specialists helping small businesses across London, we often hear entrepreneurs asking us when is the best time to grow their business.

There are actually two answers to the question depending on your vision and your appetite. You can grow to overcome problems or you can grow because of success. Growing to overcome problems, such as growing in response to a stronger competitor threatening your profit margins, is risky as you could be throwing good money after bad.

Growing because of success, on the other hand, refers to growth driven by increased profits and a strong cash position. Continuity is the keyword here. When we talk about increased profits, we are talking about profitability over an extended period rather than a sudden burst of product or service demand.

At Berley, we help small business owners across London to analyse how efficient their business is and look for the following data-driven indicators that suggest ‘now’ is the right time to expand the business:

  • There is a proven demand for your products and/or services
  • Your products and/or services are priced correctly
  • Profits are strong year after year
  • Costs are consistently controlled
  • Your resources are available and they allow room for expansion

Financial data are at the heart of our analysis. Our business growth specialists look at the overall business efficiency and review KPIs and forecasts. Most importantly, we work with business owners so they can use financial information to develop strategies and enhance their business decisions. Once you start to make a series of good decisions, growth is often inevitable.

We are business growth specialists – 020 7636 9094

When a third party is ready to invest

Another sign that it is time to grow comes when you have external investors ready to put money into your business. They may be angel investors or a venture capital firm who look to invest in promising companies like yours. They typically want ownership equity – you give them shares of your company in exchange for cash.

business power and control

Signs that growth could lead to issues

While it is tempting to respond to short-term success by growing your business, expanding too quickly will undoubtedly put your business at risk. This is because growth can create excessive pressure on every aspect of the business from supplier to staff to cash flow, the latter being the lifeblood of your business.

Once pressure is built up in one area, mistakes are likely to happen. These mistakes can quickly create a domino effect and cause other business areas to suffer.

Unplanned growth can also hurt. Throughout our business careers, we have seen business owners expand without first assessing the legal and financial impact, getting themselves into trouble quickly. Here is an example – you are expanding online and taking orders via your website, but you have yet to set up a database to manage customer data securely nor ask for consent to send them emails from third parties. If you’re in this situation, it’d be just a matter of time before you’re being accused of mishandling data and fined under GDPR.

How to overcome potential issues

If you desire sustainable growth, then you must first understand how to grow and have a plan that allows you to manage the different stages of growth properly and adjust when necessary.

Essentially, your plan should set out goals and address issues pertaining to resources. Here is an example:

1. Set goals

The growth plan should highlight short-term and long-term goals, along with roadmaps on how to achieve these goals.

2. Know your financial resource

Many business owners rely on profits to fund growth and if this is the case for you, work with our business growth specialists to determine the additional costs associated with growth, as well as the length of time your financial resource can afford to bankroll the expansion.

If you are seeking external funds, then we will work with you to get the financial data in order for your investors to review. We can also help to advise on the impact when equity is required by the external party.

3. Prepare your management and staff

Growth can impact your staff – a common scenario is increased workload can lead to more mistakes and compromised quality, which will lead to lower morale and higher staff turnover. Therefore, it is essential to create a culture for growth first. One of the ways is to involve your staff to set goals with you and stay engaged in the growth of your business.

4. Have reporting systems

How do you know if your business is performing below or exceed projections? A good reporting system with regular review of targets can provide clear visibility of operations, leading to greater responsiveness. The trick, of course, is to have the systems in place first.

5. Ask for help

Even the best plan cannot foresee every issue and there will always be events outside of your control too, so it is wise to engage one of our business growth specialists to work with you every step of the way. Leading a highly successful chartered accounting firm in London, we have spent over 30 years helping business owners across London to grow their business successfully. Call us on 020 7636 9094 to kick-start a conversation about business growth today.

Business team celebrating success

Berley can help you grow your business

Growing your business requires careful analysis of financial data and effective implementation of strategies, work that our business growth specialists excel in.

Come and discuss your situations with us, we will work with you to explore what is required to grow and how to transform your business to meet the demand of today and the future.

Give us a call on 020 7636 9094 or use to the Contact Form to get in touch.