Business

Business Expansion Risks & Challenges

We often get clients come to us, mentioning how they quickly grew the business from team of 4 to team of 100, from one single local office to multiple offices in UK and overseas within 3 years. But they struggled to keep up with the effective management. Here we will identify a few key risks the business will face during this expansion process.

1.New Competition & Unfamiliar Marketplaces

Your business may have a local or regional coverage and deal with competition well, but looking at a national marketplace opens up a wealth of new competition. Well-established and recognisable firms will already have a strong presence, whether locally or nationally, and breaking through to establish your ‘brand’ is an incredibly important part in making your expansion profitable, both short and long term.

This is particularly important when looking at European or global expansion; Newport Board Group’s MD, Michael Evans, identifies some significant financial barriers for international growth:

Local banking; capital sources can often be reserved by banks for local businesses as a priority.
Local economies; new target audiences and customers can’t always be tackled in the same way, and will have different financial situations and buying power.
Profits from foreign sales; exchange rates could negatively impact profits so it’s important to recognise the risks and set plans and targets to ensure sales success in a global marketplace.

2.HR Issues & Employee Management

One area that a number of SMEs don’t consider when looking at significant growth is the internal structural changes which need to be made. A larger business won’t be able to operate in the same way that a much smaller one can; quite often smaller businesses have ways of managing employees and dealing with HR in ways that aren’t scalable.

When looking at significant expansion it can often be the case that these structures and processes become unnecessarily ‘bloated’ – and that’s where you may need to be looking at aspects like restructuring departments and re-defining roles.

Training to Expand Skillsets
One solution to the issue above is to improve training across the company in relevant areas, thereby increasing the abilities of your employees without maintaining an unnecessarily large workforce. This allows employees to work more efficiently in a single area, rather than using multiple employees or being forced to contract any work out.

This also ensures vital areas of the business can still run in the event of sickness or loss of staff, and minimise any financial losses which may come from losing a key employee.

Losing Staff; Motivation & Pay
These sorts of changes can often result in affecting job satisfaction and motivation, most noticeably by longer-serving members of staff. New HR and employee management processes should be assessed carefully to minimise any loss of employees, particularly in areas which may result in a financial impact.

Web entrepreneur and business writer Ada Ivanoff raises the issue of pay restructuring which may be a noticeable risk of expansion. She says:“This will not only make it even harder to find the right people but in turn may encourage your best people [to] leave.”

3.Financial Engine

In small business, finance function is often outsourced, and it is mainly for external reporting purpose, the Marketing and Sales are the key focus. And the newly grown business often carry out this mindset and doesn’t acknowledge the importance of investing in having an experienced competent finance team to safeguard their business development. As a result, alongside the business growth, the business owner start to loose the visibility on how the business is doing, make decisions on bad forecast model. Lost productivity when using non-scalable old fashioned management tools.

Plan ahead -finding solutions
Identifying risks is just one part of the puzzle, and the next steps should be proactively dealing with these through careful planning. Get the professional help on reviewing your current business structure, the current process, the remuneration package, and the IT systems in use. And make new suggestions on how to improve the current arrangement and make your business operate more efficiently and effectively.

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