5 Hazards of Business Expansion

Growth in a small business can be a considerable milestone. You might be thinking, “Yay! We’ve hit 1,000 followers on Facebook!” or “We are making twice as much money as last month!” But certain growth markers like these may delude good business owners into thinking their plans are without fault. For example, beware of jumping into hasty arrangements, such as hiring new employees without a long term business plan.

Before you head down the wrong path, take a look at these five hazards of business expansion:

1. Pushing Customers Away – Let’s say you’ve reached your business expansion milestone and reached 1,000 Facebook followers. Congratulations, but were those followers collected under the effort of quantity or quality. There are cheap methods to get followers on social media such as buying “likes” from fake accounts. Those followers don’t mean that your business is actually expanding its brand awareness. Avoid making any important business decisions based on the apparent success of your audience reach.

Even if your 1,000 social media followers are made up of happy customers, there is another hazard of business expansion of which you should be aware. How do you maintain the same level of customer service for 1,000 people as you did when your business served only 20 people? There is no single, simple answer for this. For some businesses, an appropriate response might be hiring an additional customer service representative or even a team to handle incoming inquiries, complaints, etc. A growing company relies on both new and repeat clients.

2. Hiring – With the increase of popularity and success comes an increase in the amount of time needed for projects, development, customer service, etc. Let’s say that you are considering the addition of an assistant manager as a part of your business expansion. Be prepared to allow enough time to hire the right candidate for your business. One of the biggest hazards of growing a business too quickly is hiring the wrong people under pressure. Cast a wide net and be ready to spend time carefully thinning the pool of candidates. If you don’t find the right person, cast another net entirely.

3. Misunderstanding Your Finances – If the numbers are going up, you’re in good shape – right? It’s not necessarily that cut and dry. As a small business owner, you might be able to track income versus expenses in your head. But the finances involved in a business expansion can be much more complex. If you are not comfortable with calculating business finances on your own, hire a professional accountant. An accountant can not only keep track of your finances, but he or she can also give you valuable insight about the strengths and weaknesses of your business.

4. Not Collecting Accounts Receivable – Selling on account can be a viable business method, but you can easily turn into a debt collector if your business does not stay on top of its accounts receivable. One potential solution to this business expansion hazard is to sell on accounts only up to a month in advance (or maybe just a few weeks). If the account is not up to date, the client should not receive services or products without making full (or at least partial) payment at that time.

5. Overestimating the Importance of Sales Growth – Your business sales are at an all-time high, but that doesn’t mean your net profit is growing at the same pace. Nor does it mean your business is actually succeeding. There are other considerations. Are your clients and customers satisfied with your products and services? In addition to financial growth, do you have other important goals for your business? Have you considered enhancing your business’ efficiency or adding a new product line?

Every fast-growing company meets challenges along the way. Ensure that those challenges do not turn into hazards that restrict or potentially reduce your business’ ability to succeed and expand.

Pursuing sustainable growth sometimes means taking things more slowly, but if you find yourself prepared to move onto the next step, look to Sunbelt Business Brokers. Sunbelt can help you find a small business to purchase. Speak to one of the brokers to learn about your options.