A lot of people think that business growth is the most important sign of business success. They equate more customers, more money and more exposure to more success. But, business growth is also extremely risky. A number of businesses fail because they tried to grow too quickly, too soon or without the right support. Growth makes everything bigger, strong systems become even stronger, weak systems fall apart and small mistakes become big ones that cost a lot of money.
If your business isn’t ready to grow, and you put expansion plans into action, you might be making a mistake. But, how do you know when it’s time to grow, and when it’s better to wait?
What Happens if You Grow Your Business Too Soon?
Excitement, momentum or pressure from outside sources can all lead to growth, but they’re not always signs that your business is actually ready to grow. Expanding too quickly and too soon can cause a number of problems.
Cash Flow Issues
When a business grows, it usually has to spend money up front on things like new employees, equipment, marketing and inventory. Even businesses with a lot of revenue can run out of cash quickly if they don’t bring in money as quickly as they thought they would.
Confusing Operations and Processes
Though a process might work well for a small team, there’s no guarantee it’s going to work as well when there are more people to think about. Without a strong structure and clear operations, quality control drops, mistakes increase, and the customer experience takes a hit.
Business Leader Burnout
Early business growth can put too much pressure on business leaders and teams. Long hours, always having to solve problems and not knowing who’s responsible for what can quickly lead to burnout.
Damaged Brand Reputation
Brand trust can be damaged by inconsistent service, late delivery or bad customer experiences, all of which are a risk during periods of growth. This damage can be hard to come back from, as customers aren’t always forgiving.
Is Your Business Ready to Expand?
It’s important to not expand until your business is ready, which means not falling into the trap of ramping things up because you’re under pressure or impatient.
Your Income is Predictable and from Multiple Sources
A steady stream of income is a strong sign that you’re ready. This means having clear sales cycles and not depending too much on one client, product or sales channel. Though it’s fun to see sudden growth spurts, for growth to last and really make a difference, there needs to be proof that demand is steady and repeatable, not just a one-off fluke.
You Understand Your Cash Flow
A lot of businesses go out of business when they try to grow, simply because they don’t know how to handle their cash flow. You’re more likely to be ready to expand if your monthly costs are consistent, you have savings to cover unexpected costs, and you know what your margins are. If the financial side of your business seems confusing or reactive, expanding could make things worse.
Demand is Higher Than Supply
A lot of businesses expand because the demand for products or services is greater than what the team is currently capable of. This could mean you’re turning customers away all the time, you’re dealing with long waitlists or delays, or customers are asking for services that you can’t offer at the moment. However, one busy season isn’t enough. Repeated demand, and strong demand over time, shows that there is a reason for your business to grow.
The Business Can Run Without You
Owner dependency is one of the biggest signs that your business is not ready to expand. If you leave for a week, does the business still run without any problems? Can choices be made without delays, even when you’re not there? Do problems get fixed without you always having to be involved? A business that relies completely on the owner isn’t ready to grow. If you take your eyes off the ball for a moment or you need some time off, there’s no guarantee the business will continue to be successful.
Your Team is Capable and On the Same Page
Growth makes things more complicated and if you don’t have the right people working for you, expanding your business can be too much to handle. You have a better chance of successfully expanding your business if it’s clear what everyone’s role is, everyone on the team is responsible for the results, and help from leaders and senior staff is available. It’s much easier to grow when responsibility is spread out amongst the team, instead of being centralised on a handful of leaders.
The Customer Experience is Strong and Consistent
You need to perfect the customer experience before you start business expansion. Signs that you are ready to grow include good reviews and feedback from customers, repeat business or customers, and complaints being dealt with quickly. Scaling up a bad customer experience just makes the problem worse.
You Have a Clear and Realistic Growth Plan
There should never be any confusion about your plans for growth. You need to know what you’re doing – for example, are you wanting to expand into a new market or boost your capacity? – why the growth fits with your long-term goals, and what risks you might come across along the way.
Sign up to our newsletter to get the latest from Business Advice.
A lot of people think that business growth is the most important sign of business success. They equate more customers, more money and more exposure to more success. But, business growth is also extremely risky. A number of businesses fail because they tried to grow too quickly, too soon or without the right support. Growth makes everything bigger, strong systems become even stronger, weak systems fall apart and small mistakes become big ones that cost a lot of money. 
