When your small business is doing well, it’s only natural that you feel it’s time for you to expand your operations. You may be tempted to use your first business profits on expansion rather than other concerns. However, without proper preparation and the right mindset, you’ll find that rapidly coaxing your business can be your downfall.

Over 20 percent of small businesses fail to make it past their first year, and only 50 percent make it past their fifth anniversary. You need to understand the dangers of overexpansion and how you can make sure you grow your business successfully.

The Dangers of Overexpansion

Expanding rapidly is bound to put a strain on your resources and your employees, which can lead to unhappy customers.

The following are some of the most salient dangers of overexpansion that can ruin your small business.

Dissatisfied customers

When you expand your business too quickly, whether by introducing new products or opening a second location, you run the risk of getting sloppy. Customers may be dissatisfied with the new products or your new locations may not run as smoothly as your first. Overextending your resources can cause lapses in quality of your business’s services and products, which can drive your customer base away.

Decreased employee efficiency

When you introduce new services or products without taking the time to train your employees properly, they may not have the necessary skills to provide excellent customer experiences. Employees may be run ragged by the new additions and responsibilities that can affect their job performance and even employee morale. Neither of these things will have a positive effect on your business in the long run.

Stretched finances

New products and a new location require plenty of capital and investments to manage properly. As a small business, the necessary capital may often require a hefty loan or similar financial obligation. This can put a considerable strain on your resources. You may find yourself cutting corners and sacrificing quality just to save on money. This will cost you customers and may stymie business growth rather than help it.

Tips on Effective Expansion

When you want to expand your business successfully, you need to be very careful with your resources, time, and connections.

Here are some effective tips to ensure your business survives rather than fail.

Make new partnerships

Forming efficient business-to-business connections are important cornerstones in business expansion. Business partnerships help you provide new services and products without draining your capital. You need to build profitable partnerships with businesses that compliment your own.

For example, if you run a garage or automotive shop, a partnership with a powder coating business can prove lucrative. Secure such partnerships before attempting any expansion.

Study your target market

Before you make any new product offerings or addition to your services, make sure you understand your target market intimately. Knowledge of your market’s preferences and attitudes should always be considered before you offer anything new or expand your business in a new location or direction.

Without exhaustive market analysis, you run the risk of disappointing your customers and ruining your expansion efforts.

Research product performance

Research product performanceYour business operations rely on quality products to flourish and understanding what makes your products popular and profitable is essential in any expansion efforts.

For example, if you run a small bakery, which aspect of your business makes it successful? Is it the range of your products? Their unique frosting designs? Or is it an aspect of your services? Perhaps you’re the only one to offer vegan pastries or to deliver directly to customers. Find out which facet of your business customers appreciate the most and capitalize on it.

Branch out online

According to a recent survey, only 64 percent of small businesses in the United States have a website. However, the internet is most definitely the best option for a lot of business who want to expand.

Opening an online store or expanding your services online requires far less capital than opening a second location. Most of the changes you require involve training and some hardware. Branching out online can be as simple as setting up social media accounts for more engagement and contact to launching your own fully functional website.

Invest in training

Your employees are the foundation of your business and if they excel in their duties, your customers will remain satisfied. Before you begin any expansion efforts, you need to make sure your employees have all the training necessary to do their jobs. This is especially when you’re introducing a new process that’ll make your industrial operations competitive in the future.

Depending on the services they’ll be expected to provide, you may require employees to continually train. Investing in your employees can pay off majorly in the future.

Business expansion is like a military campaign: it requires plenty of preparation and strategic decision-making. Following these tips can help you launch a successful expansion and ensure that your business’s future thrives and survives.  

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