Growth is something that most business owners look forward to because it offers them a number of benefits. Primary among these is the ability to enhance the company’s ability make money. While there is quite a bit to be said about grasp, the ability to reach out for customers in new locations is very tempting, especially when you’re struggling to compete in a saturated market.
What people tend to forget is that growth is expensive and can make your overhead costs drastically more expensive. A business with $1 million in expenses and $2 million in revenue is just as profitable as a company with $15 million in expenses and $16 million in revenue, and pays far less in headaches and taxes, so consider the benefits of remaining small. Small companies are also easier to change because they have fewer infrastructures to deal with. Customers oftentimes prefer small businesses because of the perception that they can give more personal attention. And small businesses are oftentimes better to work for because they can retain the feel of a close, tight-knit community.
With that being said, sometimes growth is still the right decision, especially when you’ve maximized the amount of profit that you can make at your current size. Here’s how to know when to grow:
Your business is making a profit. Unless you can make a profit with your current business model, it doesn’t make sense to add to your headaches. In addition, without turning a profit, you will be hard pressed to find investors to give you the money to expand. It would be better to figure out a way to make your business profitable and then revisit the growth question. However, if your business is currently making a profit, you should be able to continue your success on a larger scale.
You have maximized the profit potential of your current market and can’t access new markets without growth. If this is the case, then it may make sense to expand your reach and bring in those new markets.
It is time to reward your employees with management positions and raises: If your employees have been working with you for a long time, or since the beginning, they may be expecting better positions and raises. As hard as it can be to find good help, it could serve you best to accommodate their wishes rather than see them leave for greener pastures. You can’t promote your old employees until there are new employees to replace them, so expanding is a good way to create space at the bottom so that they can move up.
You need to take advantage of economies of scale and buying in bulk. Growth can enable you to reduce costs by establishing your own manufacturing processes rather than using someone else’s, and to get better deals on material purchases because you can afford to buy more each time.
Growth is a good way to keep a business moving forward, so when it’s time to grow, grow. Keep in mind, however, that growth can be hard to reverse once you’ve started, and with growth can come more problems, so you should be prepared to adapt to them.
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