Business development is a key indicator of positive economic growth, and expanding a business offers benefits to the owners, employees, clients and suppliers as well to the general health of the economy overall. The pros and cons of business expansion need to be thought through carefully before a decision on what to do is taken. Although there are risks to be considered, if the development is done well then there can be significant benefits, not least in the area of profitability.

 

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Advantages of business expansion

 Although business expansion is time consuming, it is worth undertaking if it is done well. Many small businesses fail to grow and can remain with a dwindling customer base, outmoded systems and equipment, and a lack of confidence from potential sources of finance. Researching the market for the business’s products or services coupled with a well-thought-out strategy to manage possible relocation, the addition of new staff with new skills, and a solid financing package, can put a business in a strong position to capitalize on new markets.

Business development opportunities

 Many small businesses start from a home office, and though this may be ideal initially, business expansion will inevitably require more staff and somewhere to put them, as well larger premises to deal with a higher turnover of services or products. At this stage, relocation may be a serious option and, depending on where the business is based, consideration should be given to areas or states that have economic development zones or attractive tax breaks for relocating. This may be across the town, in a neighboring state or across international lines. Decisions will also be needed on real estate investment, including whether to buy or lease premises or land.

Expanding the customer base

 A business may survive for some time with a static customer base, but expansion demands a rollout of marketing of both existing and new products and services to build increased market share and increase profits. As market share and solid finances are developed, it can be easier to attract new financing to ensure the initial expansion achieves stability before going for further growth.

Disadvantages of business expansion

 Without a clear business plan as to why and how a business should expand, owners may find themselves struggling to maintain the required level of operation and investment to make the process a success. Increased sales may appear to be an indicator of levels of achievement, but unless these are linked to clearly increased profits at the right level to sustain and continue to grow the business, there is always the possibility of failure. Owners should closely monitor performance in all areas; if something is not working well then it should be reviewed to see if it could be turned around.

Staff development

Employing more people makes a major contribution to both the local and national economy, and expanding businesses are in a good position to take advantage of a flexible labor market. Owners wanting to get their best out of their employees should ensure that conditions in the workplace, including training, are attractive, so that well-qualified staff will want to become a part of the success story.

 This is a guest post contributed by Katie Green

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Misty Kearns

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