Making Money Magazine

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business expansion
Growingpains
HOW CAN SMALL BUSINESSES SUCCESSFULLY MANAGE
EXPANSION? DAVE HOWELL FINDS OUT

2. www.startupbusinessuk.net | MAKING MONEY | 31
S
tart-up businesses that have
established themselves will, in some
cases, reach a tipping point where
they need to expand or risk stagnation.
With over 90 per cent of the businesses in
the UK being described as‘small’and the
continued rise of the micro businesses -
now numbering five million - is expansion
even an ambition for many business
owners?
The phrase‘expand or die’has often
been used by governments and business
organisations to drive growth, but many small
business owners are content to maintain their
status quo. However, identifying the triggers
that signal your business is ready to expand
is essential, as failure to recognise them could
severely damage your enterprise’s ability to
trade profitably.
A telltale sign is when your business
becomes too busy to effectively fulfil orders and
deal with day-to-day operations. When demand
is constantly outstripping production and
service, expansion is required.
FINGER ON THE PULSE
You should be paying close attention to how
the landscape of your market is changing. Add
to this what your competitors are doing and
you have all the information you need to decide
whether expansion is needed to maintain
market share.
Nevertheless, for the legions of micro
and lifestyle business owners, the ambition
to expand may never exist. In some cases,
cultivating the small business image can be an
advantage and promotes core family values and
high levels of customer service.
Emma Jones, founder of business support
network Enterprise Nation, says:“One of the best
things about being in business is that the choice
of whether to expand is almost wholly down to
you, the business owner.
“At Enterprise Nation, the majority of small
businesses we see are ambitious for growth.
They want to make sales, take on new people
and move into international territories. This growth
drives innovation in the business and is often what
keeps the business owner and team motivated.”
Darren Fell, CEO of Crunch Accounting, says:“One
person doing web design from their kitchen table
is just as much a business as a FTSE 100 corporation
and many freelancers and contractors choose to
work that way precisely because they want to work
for themselves and not have a boss or employees to
worry about.
“We look after businesses of one or two people
that have been trading happily for years with
enough profit to cover the owners’lifestyle, but with
no grand plans for world domination.”
Expansion then, isn’t the aim of every small
business. Success though, may move your company
into a position where it needs to expand in order to
remain profitable. Being expansion averse should
not be your guiding principle. Expansion can be
postponed by cost savings and efficiency gains
across your company, but if expansion becomes
inevitable, it’s vital to approach it carefully to ensure
it’s managed sensibly.
EXPORT OPPORTUNITIES
Growing a business can mean a number of things.
For some businesses, growing market share is their
main aim. Or perhaps developing new products or
services is how they intend to grow. Exporting is also
a tried and tested method of expansion.
According to research by Barclays, 82 per cent of
businesses experienced a positive impact on their
bottom line after two years of exporting. Beyond
business growth, 87 per cent of businesses identified
other benefits to exporting, including having greater
confidence in the longevity of the business (44 per
cent), increased productivity (37 per cent), stronger
innovation (28 per cent) and a longer lifespan for
their products and services (27 per cent).
Barclays says that over 80 per cent of exporters
said that exporting had enabled their businesses
to grow, while only 15 per cent stated that it had
no impact on their bottom line. The speed of this
impact on a business can vary, although it was felt
by 66 per cent in the first year, suggesting the pay-off
in servicing overseas customers can be rapid.
The explosive growth of some businesses,
especially in the social media and technology sectors,
tends to grab the headlines, but unplanned growth
can come at a price.
Darren says:“If they are employing best practices
and using systems that can grow with them - a good
customer relationship management and financial
package, for example - huge growth in orders is
purely about meeting that capacity.
“However, if a business has grown in an
unplanned, ad hoc way, a sudden growth spurt could
mean all the systems they use need ripping out and
replacing, as well as fulfilling all their new customers’
needs. This is often where people fall down.”
Expansion can, therefore, be a planned
component of a business’development road map,
a by-product of market changes or the unexpected
success of a new service or product. In any case, it’s
important to look closely at how expansion can be
achieved without placing undue strain on the core
process of the business.
FLOURISH ON A BUDGET
Emma points out that expansion doesn’t have to be
expensive or a drain on resources:“Just as starting
a business can be done on a budget, I think it’s
perfectly possible to grow your business on a budget
too.
“Maybe you’re expanding your company by
opening a new office in a new city. Test the market
first by taking space in a flexible co-working
environment, as opposed to signing a 12-month lease
on premises and making expensive hires. Expanding
is all about taking calculated risks and that’s exactly
what risk should be - calculated.”
For many small business owners, expanding their
companies was never the plan. But when it becomes
inevitable, they can often become resistant, as a level
of control has to be relinquished.
Planning for expansion is the key to success.
This doesn’t have to mean exporting. Growing your
existing domestic markets can deliver growth, but
be clear about your goals. This will ensure you always
know where your business is going, what it will cost
to get there and most, importantly, what rewards
you’re likely to reap in return. MM
Planning for expansion
is the key to success