Growing Pains – Mitigation Strategies for Business Expansion

mitigation strategy business expansion

Whether you want to open a second location for your restaurant, expand your web design firm into a bigger office (new hires included), or just want to serve bigger clients and jobs, growth is the goal of nearly every business. Entrepreneurs have an innate desire to try new things in hopes of expanding their business, but it isn’t an easy process.

Business expansion comes with a lot of risks and challenges. To be effective, owners must balance executing new operations, managing organizational change, and ensuring proper funding of the growth strategy and daily activities. That’s why expanding a business too quickly or in the wrong direction is one of the most common reasons for small business failure in America.

However, it doesn’t have to happen to you! We put together a few common traps, pitfalls, and growing pains for developing small businesses, as well as tips and mitigation strategies to help sustain growth:

ISSUE #1: Misunderstanding and Misjudging Scale

As happy as you might be to move into a bigger restaurant or office, your business is going to face far more (and vastly different) problems. Changes in rent, location, customer volume, staffing needs, and supply chain can impact your breakeven point, business goals, and ultimately the way you handle daily operations.

In essence, the effects of scaling up demand a lot of changes in the way you do business, and often in ways you’re unable to predict.

SOLUTION: Make Smaller Leaps in Growth

Smaller, iterative growth can be a lot more helpful than jumping straight into the fire; it minimizes financial risk, which eases the transition and allows you to focus on growing organically.

Instead of branching out immediately into a new location, why not try expanding your hours or offering offsite services to test ideas? That way, you minimize the disruption of core business activities while laying the foundation for the next step.

It’s the business equivalent of learning to run before you learn to walk. Rather than taking on a million new clients, try focusing on one big one or a new project to see if your current staff can support the workload. Once everything is clearly manageable, then you can begin to look for new employees and clients. After all, if the endeavor is too challenging for your existing workforce, how can you expect new hires to perform?

ISSUE #2: Overly Focused on Sales and Revenue

Another common growth problem businesses encounter is a myopic focus on sales and profit. Too many entrepreneurs and managers find themselves thinking solely in terms of new acquisitions and revenue growth, which can lead to serious organizational issues.

While sales and revenue are important for generating cash flow, they should be the result, not the goal. Focusing on the end is a dangerous mentality — neglecting day-to-day operations, brand strategy, and organization alignment is a sure-fire way to run a business into the ground.

SOLUTION: Keep the Big Picture in Mind

Business growth spurs a lot of change. When management only communicates revenue goals, there tends to be little guidance in terms of developing organizational structure and meeting smaller milestones. It’s difficult to prioritize tasks and value when you’re focusing on the numbers.

The best leaders are capable of analyzing growth on a human level. By constantly reviewing all of your processes, ideas, touch points, organizational structure, and team dynamic, business owners can ensure that the needs of the customer and workforce are being met. Performing frequent audits to gain a deep understanding of the big picture simplifies task identification and prioritization, making it easier to guide your team through the transformation.

ISSUE #3: Changes in Company Culture, Workplace Dynamic, and Brand

Business growth often causes changes in office culture, team dynamic, and individual performance. When an employee feels as though their company has shifted focus or changed its core principles, they often underperform. Rather than being excited about the growth opportunity, he or she feels threatened, slighted, or disappointed. After all, misguided expansion can turn even the most tight-knit team into a bureaucracy by redirecting the brand’s focus, alienating employees and customers.

SOLUTION: Don’t Change, Grow

If your employees like working with you, it’s the sign of a healthy company culture — the same can be said for customer retention and brand experience. Rather than displeasing your workforce and customers by neglecting company culture during your expansion, talk to them and learn what they value most about the business. Then, stay true to your identity.

At its core, a company is just a group of people working towards the same cause. By preserving what matters most to each individual, you can effectively expand your business while maintaining a high level of intimacy. When communicating the transformation, make sure that your team and customers understand the purpose behind growth — it’s to better serve their interests, not yours. It’s simple: Take care of your team, and it will be reciprocated. Neglect them, and they will leave.

ISSUE #4: Too Much Personal Financial Investment

Because business expansion creates new responsibilities and costs, it often depletes the capital used to fund day-to-day expenses. Between investing in new real estate, equipment, and staff members, even the most carefully-budgeted accounts can find themselves in a pinch rather quickly.

When business owners attempt to self-fund, they often under-invest in the endeavor. A lack of working capital often leads to compromised growth activities, improper task prioritization, and additional stress. Even worse, when an owner takes financial matters into his own hands, it often creates a conflict of interest.

SOLUTION: Get Outside Funding

Business expansion loans are an easy way to get funding for your small business without draining your own personal resources. Take some time to figure out how much you can afford to pay back and see if getting a loan can help you remove some of the short-term pressure on your business finances — you’ve got enough on your mind as it is.

Growth is an exciting time for any business, and hopefully with some of this advice in mind you can avoid a lot of the frustrations and hurdles other businesses tend to meet when expanding.