Business expansion is growing a company by increasing its output or adding new products or services. Expansion can be done through internal growth, such as increasing sales to existing customers or opening new branches, or through external growth, such as acquiring new companies or entering new markets.
Expansion can be risky, however, as it often requires a significant investment of resources. Therefore, businesses must consider their options and plan their expansion strategies before proceeding.
When expanding your business, it’s important to avoid making common mistakes that can jeopardize the success of your venture. Here are 8 mistakes to avoid during an expansion.
1. Not Defining the Objectives of the Expansion
When expanding your business, you must clearly know what you want to achieve with the expansion. Without well-defined objectives, it’ll be difficult to measure the success of your expansion and determine whether or not it was worth undertaking in the first place.
2. Not Doing Market Research
Many business owners think that in every market, the same people want the same things. However, that’s very far from the truth. For example, let’s suppose your business revolves around construction glue.
The demand for classic construction glue is relatively high in your current market since your products are sold to house construction companies and homeowners. However, if you have the chance to sell it to a coastal area where a lot of canoes are sold, your product won’t be very demanding, especially if your products aren’t waterproof. That said, always do your market research and save time and money.
3. Ignoring the Competitors
Finding a market where you’re the only business with potential is rare. Most of the time, you’ll find markets where a business or two have already established themselves as the primary company.
With that in mind, identifying and evaluating your competitors is the quickest way to know why your peers are doing well. It also tells you the mistakes you need to avoid to stay alive in the market. This also tells you the level of saturation the market currently has.
The pie is only so big for every product out there. For example, let’s go back to that construction glue business. If you want to open one in a new market, you might want to check how many businesses have already established themselves in that market. This is important since there might not be more room for one more for that type of business around.
4. Not Listening to Customer Feedback
It’s already established that more or less half of businesses fail because they fail to recognize their customers’ feedback. Listening to the customer is essential because they will likely tell you what you’re doing wrong and how to fix it.
In addition, this is an excellent chance to know what your customer prefers, and catering to their demands will make your business thrive in the new market.
5. Having the Wrong Reasons to Expand
Before expanding your business, you must ensure that you’re doing it for the right reasons. Expansion should be a long-term strategy by following the company’s vision, mission, and goals. If you’re hesitating about doing so, here are some questions you need to ask yourself:
- Does your business have the capability to grow and sustain that growth?
- Is your business flexible enough to adapt to the upcoming changes?
- Do you have a sufficient amount of workforce for this decision?
- Are you trying to expand for the sole reason of competing?
6. Poor Recruitment Practices
If you expand your business overseas, there are many things you have to consider, especially human resources. Since it’s overseas, hiring the best international employees would most likely help you interact with the best talent in that location.
Hiring international employees requires you to do a lot of admin tasks, especially if you want them to be paid accordingly. Not only would you have to understand how the payroll works and the laws on them internationally, but you also have to figure out the correct payment method that’s the most suitable in the country they’re in. Fortunately, there are a lot of international banks and e-wallets available.
7. Long Distance Micromanagement
Establishing a new branch in a new market is only half the job as you also have to be on top of the branch’s operating practices. However, even just managing two branches can be too much for a person to handle. Neglecting the other one is inevitable if a person is micromanaging both branches at the same time. This will slow down your decision-making process as you must consider two branches in every decision.
Not only that, but the reduction of quality may also be inevitable, which can hurt your sales in the long run. So how will you fix this? The best thing you can do in this situation is to hire another manager. This will reduce your workload and significantly improve your business’ services as you won’t be juggling two branches anymore, and you’ll be able to focus on just one.
8. Going After Quick Money
It’s no secret that businesses expand to earn more profits. However, expanding in and of itself can be very expensive since you have to incur costs for the workforce, equipment, rent for office spaces, etc.
One of the mistakes a business owner makes is expanding to earn quick money in the short term, especially if they take it a step further and cut costs to maximize their profit. If you’re looking to expand, it should be for the long-term to justify its costs.
However, if you are forced to cut costs to expand, there are many ways for you to find financing from investors. Also, you can get a loan from CreditNinja.com and other lenders.
Expanding is a massive undertaking for your business. Not only does it require a vast amount of staffing, but it also has enormous costs and tons of paperwork. However, if you want to do it perfectly, watch out for the things you need to avoid, especially the ones discussed in this article.