Financial Data
Updated 29 Sep 2020

How to manage the growing pains of business expansion

Unbelievable as it sounds, the rapid success of a business can actually lead to failure. If, for instance, the prosperity of a business out-runs its ability to manage that success, decline follows. 

Greg Morris , 07 February 2018  Share  0 comments  Print

All the answers to your unique business lifestage questions

Let’s say a business achieves ever-increasing benchmarks in sales, but has an infrastructure that isn’t keeping pace. Flaws in management systems begin to appear. Quality control falls out of sync with growth. And, eventually, a negative tipping point results.

Never underestimate organisational and management factors in translating a sustained growth strategy into reality. Processes and structures that are well suited to today’s challenges may buckle under the strain of new demands - or make it impossible for your business to meet them.

So, if your business is on an expansion path, here are six considerations:

1. The right people 

Establish a management structure to ensure accountability against established benchmarks, and to ensure that the quality control of goods and services remains constant. The quality of your service often hinges on the people within your organisation, so you need the right people from the bottom up.

Related: Xoliswa Daku of Daku Group’s top lessons for growth to inspire yours

Allow non-management team members to play to their strengths and reward them for it. They will reward you with great results and make the base for your growth that much more solid, while building a strong team environment. 

Those who face the greatest complexity – in functions that will see increased activity as a result of expansion – must be able to take initiative beyond the confines of their jobs, to cooperate and build linkages across the organisation, and to complete many tasks in parallel.

2. Quality control

It’s easy to lose sight of quality standards when a company is expanding rapidly. Assign the responsibility for maintaining product and service quality to a dedicated team in the management model. Give them oversight over internal systems, product development, manufacturing, etc. 

It’s important to remember that service-based businesses also face quality issues as they expand, and that finding skilled resources can be as restrictive as a bottleneck in a plant’s production line.

3. Scalable processes 

Ensure that your systems, processes and assignments are consistently executed 100% of the time. Don't allow business processes to become unscaleable; determine which are likely to come under particular stress as and when the company grows. 

4. Cashflow management

Cashflow -management

Always, always, always be mindful of your numbers. Numbers don’t lie. There’s usually a bit of risk when expanding, but you don’t want to find yourself outspending what you can afford. More oversight or changes may be needed to increase efficiency, sales, and quality.

When deciding to front-load capital investment, be certain that cash is coming into the bank as a result of theinvestment, and remember that accounting profit and cash profits are distinctly different. Cash profits keep the lights on. 

If you don’t have the capital for expansion, and you require debt funding, weigh the benefits and the downsides of borrowing money, including the interest rate and the length of the loan.

Related: 5 Business growth strategies for 2018

5. Investor sourcing

Conduct in-depth research into potential investment partners; each has specific investment mandates, sector or industry preferences, and value preferences. Identify, assimilate, and make sense of these.

Then, take the time and trouble to ensure that you adequately evaluate a potential investor. Start by finding out where your respective interests align. After that, you should begin to uncover: 

  • The origins or sources of investors’ funding
  • Their detailed investment track records
  • Their investment mandates
  • Their typical risk profiles
  • The returns that they traditionally target.

6. Cultural communication

Spend as much time defining, communicating, and inculcating your existing and growing culture as you do worrying about business strategy. With each new element of expansion, invest time and resources in ensuring that the combined cultures of the different entities do not implode – affecting   key people, clients, or worse. Make your people aware of what’s coming and how it will affect them, as well as what the greater vision looks like. 

What’s the bottom line? 

Whether you’re a small/ or medium-sized business wanting to expand nationwide or a large company planning to go global, expansion can open up a slew of risks. These may be existing ones that gain traction or new ones that emerge for the first time. Either way, it’s critical to recognise them, plan for them, and make the necessary plans for your protection in the face of expansion.

Rate It12345rating

About the author

Greg Morris

Greg Morris is the Chief Executive Officer of MICROmega Holdings Limited. Greg joined the group in 2000 and was appointed CEO in January 2011. Responsible for the day-to-day operations, management and corporate finance transactions of the Group, Greg holds a Bachelor of Accounting Honours Degree and is a qualified Chartered Accountant.    

Introducing the cash solutions for a growing business

Are your cash solutions supporting your growing business? Leigh Livanos, Head of Payments, Collections & Cash for Business & Commercial Banking explains how your cash solutions needs will evolve as your business expands.

Login to comment