One only has to look as far as the latest “in-vogue” neighborhoods around the country to realize that we are in the middle of a small business boom. With so many new vendors setting up shop every day, it’s easy to identify a community of young and eager entrepreneurs whose ambitions know no bounds. And while several of these start-up companies find great success in an emerging market of new customers, many discover that their dreams of comfortable autonomy and local, sustainable production crash and burn when they begin to think big.
No matter what your goals are as a business owner, it’s important to review the pros and cons of growing your business in order to hone your vision and assess potential stumbling blocks before they arise.
Pros and cons of growing your business
Pro: Greater efficiency and economies of scale
Think of it like this, the more products you make, the cheaper it costs to make them. It goes back to the assembly line concept: when you can automate a process and create greater efficiency, it reduces both the cost and the time associated with production. And producing in bigger qualities means the general cost of your materials also goes down.
Con: Increased capital investment
In order to get bigger, you have to put more money into your company. A larger company means a larger labor force, increased or different facilities and specialized means of production. According to one study conducted by Bloomberg, if a company like Walmart were to add five employees to its U.S. supercenters and discount stores, it would generate about a half-percentage point to selling, general and administrative expenses, but the added costs of paying out federal minimum wage and health benefits would amount to about $448 million additional overhead a year.
Pro: More locations and larger brand presence
The profits and overall brand presence you garner with a single store increases with each new location you open. Not only that, but you have the ability to showcase new and different products and to test sales and operational strategies to see which works best for your fleet of stores.
Con: More complex logistics with multiple locations
While the ability to expand your presence is certainly a mark of success, it also places different and often more complicated demands on you as the business order. This is because the needs and the workflow of the business are now spread out rather than consolidated in one location – but there is still only one of you!
Pro: Your business has a greater impact on your community and local economy
Hiring more staff to manage the increased workflow employs local residents and creates a healthier economic system. Not only does it provide families with the means of living, it also stimulates the local economy and brings money back into the community. In fact, the US Department of Commerce shows that “small business generated 65% of net new jobs over the past 17 years.”
Con: Risk of losing an intimate connection with your employees and customer
With your attention divided amongst several stores and logistical obligations, expanding means you have less time as a business owner to connect with your staff and focus on the details of making your individual stores a success. You’re also afforded less opportunity to form unique connections with the customers who frequent your shops.
Pro: More money to produce greater quantities of product
This goes without saying. The more sales you generate, the more cash you can put back into the business. Investing in greater quantities of product allows for a faster turn over in stores. In other words, if you only have three shirts available in your store, you can only sell those three shirts, but if you have three hundred, your capacity for sales increases dramatically.
Con: Difficult to maintain craftsmanship
When you have to produce larger quantities to support your business, it often changes the techniques used in production. As product scale goes up, business owners may be forced to consider efficiencies rather than allowing for a specialized, time-consuming production plan. Similarly, it becomes increasingly difficult to replicate handcrafted products on a large scale.
At the end of the day, the decision to grow (or not to grow) is a personal one. Every business owner should create their own list of pros and cons to make a case for growth. If you do decide to expand, be sure to create a detailed business plan to account for additional costs and potential growing pains.
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