16 December 2015 category: strategy & business planning
There are a number of good reasons for you to consider expanding your business:
- Survival. If you are a sole trader, your business is entirely dependent on you. Any absence through illness or injury damages your business.
- Risk reduction. If you are a small company, the chances are that you have a small number of Clients and work in just a few sectors of industry. This means that you are susceptible to a severe drop in income if some of those customers stop buying from you or a sector goes through a tough time. It is best not to have too many eggs in one basket.
- Expanding your expertise. The more customers and sectors you work with, the greater the knowledge and expertise your company will gain. This knowledge helps you to attract even more customers with increasing ease.
- Increasing your buying power. The bigger the company, the more goods and services you buy. As you become a more important customer, the greater the likelihood that you will get favourable trading terms.
- Reducing costs. The bigger the company the more likely that you can reduce unit costs. For example, if you need a receptionist, the costs will be the same whether you have 20 or 50 people, but the financial impact in percentage terms is clearly different.
- Greater profitability. A larger company, servicing more customers and able to reduce its costs, will have a much better level of profit.
Expansion cannot make a bad company good, but it can certainly help to improve every business if it is implemented carefully.