Many small businesses fail to expand or stay afloat because they don’t recognize pitfalls. Knowing these five business expansion mistakes can help growing companies avoid oversights and miscalculations.
The time comes when the season seems ripe for development and budding startups decide to grow. But pitfalls often chaperone business expansion. Planning is vital during the growth phase of any company, and creating a business development strategy will help you avoid mistakes. Tend your growing business with care and give these stumbling blocks a wide berth to help your company flourish.
No market research
Understanding your target market is vital before investing in business expansion. Research shows 42% of business failures stem from a lack of demand for their products or services, and 14% result from ignoring customer needs. If you feel ready for development, doubtless, you have customers, but will patronage grow with your business?
Market research can help you understand your customer base, including their needs and interests. Consider price, product, place, and promotion when deciding whether your business is ready to grow.
Business expansion is a superb goal. Is it viable yet, though? Many small businesses imagine their current profitability is evidence they will succeed. But operating at a higher level is another ball game. Fast expansion can decrease profit margins, for instance. You might benefit from gradual expansion, rather than development on a grand scale.
Consider seasonal trends and other factors that might reduce sales, and create a revenue and costs projection, before expanding your business.
Not planning for hidden business costs
29% of businesses crash because they run out of money. So ensure you have sufficient finances in place before expanding. One reason they experience a cash shortage stems from financial oversights. With growth comes the need for added space, employees, marketing, purchasing inventory, business software and even more expenses.
Hidden costs can relate to incidentals that stem from your more obvious expenditure. Additional personnel could mean more desks, chairs, computers, and pension and healthcare packages. A larger office goes hand in hand with more expensive insurance and maintenance costs. Raising your budget to accommodate unforeseen expenses could save you from future hardship. Business software can also be very costly, depending on the needs of the business.
Compromising on experience and talent
Experienced employees without talent, or vice versa, aren’t as valuable to a business as the complete package. When hiring, you may find some job candidates show promise and will accept low pay.
You might want to employ them, but doing so is like playing the lottery. Whether you hire someone with years of experience but questionable talent or somebody with skills and little experience, you could regret it later.
Your employees are an investment. Experience brings consumer and industry knowledge, while talent offers innovation and advancement. Find employees with both qualities for maximum benefits. They will help you expand your business and remain afloat.
Not recognizing the need to stay ahead
Competition could drown your growing company if you are not alert. Business expansion widens the playing field and brings new challenges, and one is staying ahead of industry competitors. Many developing businesses fail because they are complacent.
Remember to stay on top of trends, and when you implement terrific ideas, be aware your competition will copy them and make improvements. Stay on your toes to avoid being left behind.
Nobody can promise any business will thrive when they expand, but yours stands an excellent chance if you do your best to avoid common pitfalls. Take time for in-depth marketing and financial planning, and select staff with care. Stay awake to industry changes and ensure you are ready to take the plunge before you leap.
If you would like more information on how our team can help save you time, money, and a ton of headaches, contact our team!