The very nature of the typical entrepreneur is to think big and take the risks necessary to be big. It is this trait in the many who have built America’s small businesses, that has made this country what it is today. After a few years of success, most are looking for ways to expand upon that success. However, there are a few questions one must ask before devoting the resources necessary for expansion. First, and foremost; is there an untapped market or opportunity into which I can move? If there is; do I have the resources and infrastructure to handle this expansion? Will this expansion be detrimental to my existing customer base? As the company grows, will I be able to maintain the passion that is the driving force in the company’s success thus far? Being too caught up in potential revenue growth at the expense of the needed resources (both money and labor) to preserve the core business, is a recipe for disaster. Though you may be an independent thinker, my advice is to get input from the frontline managers on how an expansion would affect their departments. Ask them to give you an honest assessment. Even if it doesn’t sway your decision; it will give you a heads up on what the future challenges may be, if you decide to go forward.
One of the risks today with business expansion, is the continued volatility of the United States’ markets as a whole. Prior to the 2008 collapse, there were normal ups and downs in the business cycle. The economy always came roaring back after a slow-down or recession. Since 2008, it seems to be the opposite. When things start to get better something happens to throw the economy into a tailspin. Growth has been minuscule at best, partially due to the skittishness of American business owners. A good example of a successful company that expanded at the wrong time was Large Format Digital of Edgerton, Wisconsin. This simple but initially successful business printed advertising for the side panels of large trucks. By 2007 they had $3 million in annual sales and employed 15 people. In 2008 they decided to do a $1 million expansion just before the financial market crash. In March 2011, they closed their doors for the last time. Obviously, it’s hard to predict the timing of the economy, and that should not be the sole reason for putting an expansion on hold. As long as potential challenges are planned for, weathering the inevitable storms will be much easier.