Expanding Your Business: Be Cautious of Common Pitfalls

Thinking of expanding your business? After all – if you aren’t growing, doesn’t that mean that you are shortchanging your potential? Not always.

Sometimes business expansion can be rooted in things other than success. Questions to ask:

• How much can you manage?
  Biting off more than you can chew can affect not only your business, but your personal life.
• Whose decision is it, anyway?
  Pride and the support of friends shouldn’t overshadow business realities. Take a sober look at your business and understand what would be needed to take that step.
• Balance good times with bad.
  When times are good, the sky often seems the limit. But when markets shift, not all businesses survive. Ensure you can weather these downturns before you expand.

Sometimes, a superior product or service will drive a business owner to expand faster or farther than they can manage. As one entrepreneur writes, “There are more factors to a successful business than having a good product.”

“It opened my eyes that a business is more than just a product, it is the sum total of every aspect of it. This is contrary to the usual main focus of business plan activities that place a lot of emphasis on the company’s product and its delivery to the customer.”

Four things he suggests making sure you have in order, aside from the quality of your product or service:

1. Cash flow management.
   Be wary of the success of strong core product masking inefficiencies in the business.
2. Good accounting practices.
   Some small businesses are run like a sole proprietorship. This can make potential investors nervous over lack of procedures and checks and balances.
3. Developing a management team.
   In the beginning, it is often the founder that has to do it all and get his/her hands dirty in every aspect of the business. But once you hit the 3 year mark and especially if you have large shareholders, an organizational structure and management team needs to be in place.
4. Integrity of the Staff.
   Take a fresh look at any patchwork solutions that were put in place as the company grew, especially when it comes to potential issues with staff. Ensure that there are not potential financial problems that are hidden within practices, held over from the early days.