Business expansion: Is the road to growth always under construction?

On many occasions, we discussed how to set up a small and medium enterprise, how to formulate a good business plan, startup strategies, digital marketing, cost management and so many things.

But how many times have we discussed how to expand an established SME?

What is the right time and what are the approaches of expansion? How will an entrepreneur decide what is the right time for an expansion?

As a matter of fact, supporting a new business is indispensable and it is equally important to support and guide the established businesses as well.

We have to bear in mind that business expansion is a very challenging process and it is filled with uncertainty and stress.

As a developing country and with so many visions ahead, we cannot afford the button of a relay race to fall from any of the growth components.

Guiding established entrepreneurs is important to mitigate the risk of expansion and let the success story remain a success story.

Expansion of a business does not only require taking critical decisions and bringing structural changes, but also refining the policies to make the expansion work.

If an enterprise tries to expand too early, it must watch out for the landmines. The business might not be able to raise enough financing for the expansion. The cost of debt or equity may be very high.

On the other hand, an enterprise may lose an opportunity if it waits for a long time to go for an expansion.

The competitors may have the first-mover advantage to create a better product and dominate the market.

In case of the late movers, questions can be raised on the feasibility of their expansion.

Sometimes, we expand our business to seize an opportunity and sometimes to guarantee our existence. Both are important to understand and predict as an entrepreneur.

But before we start thinking about expanding our enterprise, it has to be made sure that the company is actually ready for the next step.

Gaining contemporary success in business is not the only thing we should look forward to.

First, we must have a consistent customer base. Having a regular flow of customers means that there is continued demand for our products or services.

And of course recurring customers are also important, because it proves that they are satisfied with our products and services.

When our customers start asking about new locations or demand for new products, it is time to think about going for expansion. 

If our customers come a long way to visit our enterprise or retail site, we have to consider opening a second location.

At this stage, we need to do some primary research and discover if we have a viable market which can ensure continued growth in business. Hopefully, our growth will satisfy the customers, which will increase sales and finally we will be able to make money for new investments in expansion.

Decision of growing also depends on the industry we are operating in. Different industries will react differently depending on the maturity of the industry. 

Expansion of a growing industry is easier. The entrepreneur might not go for expansion of an industry, which is stagnant or fading.

There is a probability that we might lose money in the end. 

On a separate note, even if our business belongs to a stagnant industry, we might feel confident to expand business there by offering new products or innovative services.

There might be offerings that can future-proof our business. These new products or services can help us gain the income and stability to grow further.

Sometimes we will need to expand business to seize new opportunities before they vanish.

Being flexible and willing to change direction when opportunity comes is the best decision to take at the time of an expansion. 

However, ensuring a regular profit is a must before taking a decision to go for expansion.

If we can log regular and steadily rising profits, we can be sure that our business is ready to grow.

We must know exactly how much we are bringing in and how much we need to spend to stay floating.

We also know how much we currently have in hand to spend. Before we start making plans to grow, we need to understand our current financial situation as well.

The requirement of additional assets is always a tough call to take for an SME.

In addition we might require new physical space, get all necessary materials stocked up, recruit new staff and clear all overhead payments to ensure growth.

As a whole, we must be completely prepared economically before starting to take these steps.

When it comes to running and expanding a successful business, the most important thing needed is a strong and dedicated team. 

If we do not have reliable employees, then we certainly will not be able to expand business successfully. 

For the expansion of a business, it is a must to put a lot of effort on the people who are working for the enterprise. 

We have to ensure that those who are on board can handle anything that plays a role in building a business.

One important thing that is a must to keep in mind is complacency. It can be the single most dangerous threat to any entrepreneur. 

A business cannot be stagnant – it is either moving ahead or deteriorating. 

Complacency does not just restrict improvement and growth. At times it breaks what already exists. Complacency is indeed a value destroyer. 

To avoid slipping backward, we need to make sure we are always doing something to move forward.

It is indeed a tough balance for an entrepreneur to maintain. 

Sometimes, the right answer is to embrace the experiment, develop new expertise and get by. But sometimes, it is sensible to avoid the weak areas, needless encounters and focus on what we do the best.

Growing always needs extra effort. It is the gut and attitude of an entrepreneur along with his experience and foresight that help him make a successful expansion.

The writer is a senior banker and entrepreneurship enthusiast.