Business Growth: Risk and Reward

Growing your business is a given. You’ve launched your business to make money, and growing it larger is the gateway to economies of scale, higher profits, and greater stability–but only if you do it right. Business growth also presents risks and vulnerabilities. Both strategy and execution are crucial. Execution without strategy, or strategy without execution, are equally destined for failure. The bigger you are, the higher the stakes, so it’s vital to enter growth phases with eyes wide open.

Growth Is Achieved in Myriad Ways

First, consider what type of growth you’re seeking. Will you grow deep, or wide? You may want to boost market share or number of locations; to increase customers or employees; or simply to grow revenues or profits. When evaluating your business from a growth perspective, keep an open mind about what growth might mean to you. Don’t get romantic: falling in love with your strategy or business model can result in blind spots.

Define your objectives. What do you intend growth to achieve? What problems do you envision growth will solve? Growth is a multi-layered process: Anticipate the phases you’ll have to go through on the road to expansion, and the challenges you’ll have to meet.

Costs of Growth

Growth costs money. Consider what it will cost to achieve your various potential growth goals. Will they demand a big up-front investment, or a gradual cash infusion? Carefully evaluate what kind of return you can expect. Growth efforts will affect your bottom line differently in the short, the medium, and the long term. What investment can you afford? What degree of risk can you afford?

Growth Demands a Stable Foundation

Is your business structure ready to evolve, or do you need to resolve internal issues before engaging your growth strategy? Analyze the costs and risks of these internal improvements. Without a proper foundation in place, growth is destined to fail. Glaring internal problems are bound to be compounded by growth, so invest in resolving them first.

External Forces Impact Growth

After a soul-searching internal review, it’s time to consider external forces such as the market, the competition, and the general economic climate. An honest evaluation of your market share, your customer base and their degree of loyalty, and your brand strength is essential. What will it cost to maintain or improve your presence in the market? Keep a sharp eye on your competition: they are sure to be pursuing growth strategies of their own. Determine which parts of your business are most and least vulnerable to competition. Anticipating the overall economic picture is challenging by nature, but try to figure out which aspects have the greatest impact on your industry and stay on top of them, whether that’s interest rates, regulations or cost of raw materials.

Big Risks for Big Rewards

Growth is essential, but unless it’s well managed, it can be the death of a company. Because it always requires financial investment, and generally demands evolving strategically and culturally, growth naturally carries a risk equal to, or greater than, the potential rewards.