To Expand or Not To Expand -- That's the Eternal Question

 
  Hort Snacks - June 2017
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 Every business operation goes through cycles and stages. You might see periods of rapid growth and big changes or you’ll see slow, steady change, forwards or backwards.

Every business grows at its own pace. The rate of growth will vary from person to person, business to business. It depends on a number of factors, largely based around economics and resources. These might include basic things like supply and demand, such as whether you can supply the demand for your product (assuming there is demand and that you have room to grow up to match it). It might relate to financial resources, such as whether you can you afford to grow and invest in the growth of your business. Quite likely, it comes down to bodies, meaning human resources. How many people do you have available, either at the start or further down the road? Are you a group of partners that can divide and conquer and share the workload or is there just you and your ideas?

Early on, you might see multiple years with rapid growth, with a significant increase in size from one year to the next. This would be normal, as you are finding your place, increasing your skill, experience and capacity, as well as stretching from a startup to something that is pretty established. You might tend to blow over and past some of those barriers that might slow a larger or more established business, simply because the returns on the rate of growth are much higher and more obvious and maybe the risk is slightly lower. There is a big gap between what you are producing and what is demanded by customers, so it is easy to see the connection between a decision to grow and the value of it. However, a smaller operation might have greater risk related to decisions such as equipment purchase, etc. or they might not be able to take advantage of equipment or automation-related growth.

Once established, the rate of growth may or may not change, depending on the same factors that affected a young business, but the risk can be a bit higher and the decisions might be a bit bigger. The solutions and the decisions that were “no-brainers” for a small business might need a bit more thinking and number crunching. On the flipside, a bigger operation might have the funds to purchase equipment more readily than its smaller counterpart.

It is a bit like a boat. A little boat is pretty nimble and is usually able to take advantage of sudden changes in wind, current, etc. It is quick to turn and catch that new tack. A big boat is slower to come around and react to changes. At the same time, it can handle bigger changes gradually or take on more cargo, whereas a little boat is limited. A big boat can handle bigger changes better than a small boat, but it is slower to come around and react.

When it comes to expansion, ultimately, you have to look at whether expansion is possible with the finite amount of resources that you have. Can you handle the growth (and associated increase in work) with your current labour force? Can you afford to make the change? If there isn’t room in the budget or in the existing operation, what is going to have to be dropped to make space for the new thing and will the new thing be worth it? Is there a way to make the expansion work, if you come at it from a different direction? How long will the expansion last? Will the advantage of the expansion be sustainable or will it become dead weight if things change down the road?

All of these factors need to be considered. Take some time to weigh things out. Talk to a trusted colleague or partner. Do the math. But then, if it is worth it, embrace it. Here are a couple of quotes to drive it home.

Forget past mistakes. Forget failures. Forget everything except what you’re going to do now and do it.” – William Durant, co-founder, General Motors

And the day came when the risk to remain tight in a bud was more painful than the risk it took to blossom.” – Ana´s Nin, writer

 
 
 
 
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For more information about the content of this document, contact Robert Spencer.
This information published to the web on May 29, 2017.