Common mistakes of business expansion

6 common mistakes of business expansion and how to avoid them


Sustaining the growth of your business can be a risky affair and there are a number of pitfalls for the unwary. The business world is challenging and competitive and financing growth with little working capital can be extremely challenging. Six of the common mistakes of business expansion made by companies are discussed below.

1. Always listen to customer feedback

It’s recognised that up to 42% of startups fail due to low market demand for their products or services. Avoiding a mistake like this means listening to customers and achieving real understanding of your marketplace. Before making any firm business expansion plans or incurring any debt, take time to do your research and ensure demand meets your revenue targets.

2. Taking on too many employees at an early stage

Small businesses always need to keep scalability in mind as it affects every aspect of operations. Taking on too many employees at an early stage of your business can really impact on profitability. Although workloads can be heavy for small business proprietors and their key team, think carefully about whether you will be able to maintain new employees in work at all time and the costs the business will incur as a result of their employment.

You could always take on contract staff or freelancers to cover really busy periods and this gives you far more flexibility to scale up and down, without placing too much financial pressure on the business.

3. Step back and take time to reflect

Many small business owners spend so much of their time directing and managing the operations that they never think about ways it could be improved. You should regularly make the time to review all your business processes in order to make the most of new technologies and resources as this can boost productivity and workplace effectiveness.

4. Devise a marketing plan

Sales and new leads don’t appear out of thin air, so keeping an active marketing plan in place for your business will help you grow exponentially. Many large corporations set aside 40% of total revenues for their marketing budget, and although small business owners should not need to make this much expenditure it is an investment that’s needed in order to grow the business. It’s best not to cut corners with marketing efforts either, where possible engage professionals to carry out the work for you, as this is not the sort of task that can be left to general admin teams.

5. Locking up working capital

Look at all available finance options prior to making any decision to use working capital for purchases. Once you’ve utilised capital in the business to finance equipment or products, you won’t be able to access it. Leasing and hire purchase agreements are often more suitable for financing larger pieces of equipment and you benefit because you can include these charges in your monthly expenditure accounts.

6. Minimise risks as much as possible when you fuel business growth

Research and knowledge are key tools before going ahead with any business expansion. Take the time to learn as much as possible about your proposal before making firm decisions, this is even more important if you are planning an overseas expansion as there are so many differences in culture, employment laws and legal requirements.

Common mistakes of business expansion – where to find out more

We can help obtain funding for your business expansion – please get in touch if you’d like to discuss this with us.

Find out more about our services on our business finance solutions page.

Image: Two Person in Formal Attire Doing Shakehands – Credit to by Homedust licensed under Creative commons 4

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