The Pros and Cons Of Growing Your Business
You’re in business to make money, and at some point in your business life, you will be faced with the decision - to grow or not to grow.
For the most part, business growth is a natural process and is a positive thing if you manage it right. When making a decision on business growth, the key is to review the pros and cons, use the time to examine your vision and goals and identify any potential issues. A general view of the pros and cons of business growth is as follows:
Pros of business growth:
- More diverse audience
- Increased income
- More opportunities for your business and partnerships
- Increase in brand awareness
- More money to improve quality of products
Cons of business growth:
- Moving too fast can be detrimental to your business
- Your business’s finances could suffer
- You may not be in full control anymore
- More complex logistics
Signs it's time to grow your business
Let’s start out by focusing on the reasons for business growth, and indicators that the time is right to expand your business.
Proven growth market
If there is a proven growth market for your business type and business model, then you would most probably be mad not to expand. If you have watched your competitors expand their businesses and take advantage of a proven growth market, you may be wondering how much time you have to expand, before the market changes once again. If there is a market for your business to expand, you have to seriously consider whether now is the right time to grow your venture and if you were to do so, what the benefits would be.
Strong existing cash flow
Does your company have a strong existing cash flow? If the answer is yes, then this is a sign that your business’s assets are increasing, and as is its worth. When a company has a strong existing cash flow, this is an indicator that it is the perfect time to grow the business and begin to take the steps needed to expand. Strong cash flow means that you are able to provide a buffer against any future financial problems, which means that taking a risk and expanding now, could be ideal. There will never be a perfect time to expand, but if you have a good cash flow in place, this is a strong indicator that it could be the right time to take the next steps and grow your business.
Have you begun to notice organic growth? Has your business begun to grow on its own? Has your output increased? Are your revenue levels rising? Are you constantly gaining new customers? Are you designing new, successful products? If the answer to all of the above is yes, then this suggests that your business is growing organically, which means that it is ready to expand and grow further. Instead of focusing on mergers and finding investors to help grow your business, your company has begun to grow on its own, which is a sign that it is ready to expand and has the potential to succeed as a larger brand.
Have you spent time focusing on expanding your business geographically? Have you put time, effort, and money into researching new customer bases in different areas of the country or world? If your results have shown that there is an active call for your products or services in a wide geographic area, this is another positive sign when it comes to whether the time is right to grow your business. What is important is that you take the time to ensure that when it comes to geographic expansion, there is definite potential for success.
Signs it could be beneficial to wait to expand
We have discussed the positives of business growth and indicators that a business is ready to expand, but what about the reasons against growing your business? The fact is that if you make a commitment to expand your business when the time isn’t right, the pressure could split your business open at the seams and damage it forever. That’s why it is so important to ensure that your business is ready to expand, before taking the steps to begin growing it.
The fact is that rapid business growth can quickly lead to declining product or service quality. For any business’s corporate identity, it is quality that is key, which is why it is so important to ensure that before choosing to expand, that the quality of what you offer your customers is not going to be compromised. Because, once a business loses its reputation as offering quality products and services, it can have a long-term impact on that business. Hence why, ensuring that your business is ready to expand, and has the means to do so and continue providing high levels of quality, is so important.
With expansion comes additional financial costs. Expansion requires major financial investments, which can have a devastating effect if a company is unable to keep up with the costs. Financial problems that result from expanding too quickly can have significant implications for a business, and can even lead to the downfall of a business and the end to your venture. That’s why when it comes to expanding it is crucial that you have the financial backing to ensure that you can afford to cover the various costs that come with expansion, and won’t end up in financial difficulties as a result of growing your business.
Loss of control
In many instances, the head of a company does not survive its growth. If you choose to take on investors, it is vital that you always hold more of a stakeholder in the business than all of your investors combined, as otherwise, you could end up ousted from power. Or at least, losing creative control over your business, which is not something that any business owner wants, especially when they have worked hard for years to build up their venture and create a company that they can be proud of.
The decision is ultimately yours
The fact is at the end of the day the decision of whether to grow your business now or wait until later, lays with you. As the owner of the business, it is a decision that only you can make, however, that does not mean that you have to rush the process and attempt to expand your venture too quickly. It is vital that you understand the risks associated with expanding too fast, and also that you understand how to determine when the time is right to expand. Hopefully, the tips and advice above will help you to do that, and ensure that when it comes to your business, you don’t make the catastrophic error of expanding too quickly and ruining your business as a result.
Ultimately, it is you who has to decide when the time is right to expand, but the advice above should help you to make a more informed decision. For further advice, get in touch with Berley to talk to our experienced business growth advisors today.