How to best manage business expansion – words Alexa Wang
When a business starts growing, it’s a strong sign that things are basically on the right track; the products or services are in demand and profits are being made – the fundamental success markers of any business.
Sooner or later growth has to be managed since it’s likely certain steps will be taken such as hiring more staff or maybe moving premises, and people may have to work a little differently and shift their focus compared to when things were on a smaller scale.
What to consider when expanding:
New tech and equipment
Your current tech and systems may have served you well, but expansion often means an upgrade or total replacement is required to meet the demands of a growing company. For example, an increased volume of orders and thus size of stockholding might require investment in warehouse inventory management systems to cater for heavier workloads.
Present data storage may require an upgrade or rethink to meet expansion demands. For example, you may consider moving over at least in part to cloud computing for increased data capacity without the heavy expense of physical storage.
Change in management roles
If you’ve been used to being involved in just about everything that happens in the business and attending every meeting, then it may be time to recognize that as the business expands it’s harder and likely inappropriate for one person to be ‘in’ on everything.
Effective delegation to others is important; senior roles tend to change to that of a more strategic nature as a business expands.
Consider financial demands
A growing business makes increased financial demands even though it should be increasing turnover and ideally making more money than before.
Working capital – you may need to invest to support growth such as adding new equipment and infrastructure, hiring more staff, increasing your stock levels and maybe funding a move to new premises.
Is this money readily available or will funding from investors or a financial institution be required? Ascertain as soon as possible whether working capital needs to be raised and how you’re going to do it.
General financial health – just because the business is growing and turnover and profits are increasing don’t assume all is rosy; it’s more important than ever to budget carefully and plan ahead.
Expenditure for growth can cost more than you think; major expenses you thought would be in the future may occur sooner, and it’s easy for cashflow to come under pressure. Financial planning for growth is vital – get your accountant involved.
Business growth will almost certainly involve taking on more staff whether ‘at the coal face’ such as in the warehouse processing orders, or in management or specialist roles such as marketing or finance.
Although you obviously require people with the right skills, it’s important newcomers fit your company’s culture in terms of values and beliefs in order for the type of strong team ethic that’s usually present when a business is in its fledgling stage to be maintained.
Be careful of promoting ‘just because’. For example, while you might be tempted to promote someone to a management role because they’ve been involved since the start they may not be the best choice.
Management is a skill all of its own and those successful in less senior roles don’t always make the best managers. For example, a top selling salesman isn’t necessarily the best sales manager. Avoid sentiment.
Planning ahead is important to manage growth; having to hurriedly add new equipment or hire staff means errors can be made, and service levels could actually decline as growth kicks in.
Even when sales go well and revenue rises, keep checking productivity and processes to ensure the growth is paying off in increased profits.