Pitfalls to expanding a business
The hardest part of running a successful business lies with the numbers. Poor accounting methods, incorrect estimates and inadequate insurance can break a business before it even gets off the ground.
You have to know the numbers to know if you’re going to make money.
Other times, businesses fail as soon as they seem stable. Business owners feel successful, and they want more.
But, growing too fast, trying to break into a new market, or dramatically increasing the size or complexity of a company can ultimately lead to its downfall.
Avoid these pitfalls to expanding a business by focusing on process, product and price.
People
When it comes to staff, it’s important to focus on quality over quantity. Look for workers who are competent in their skill sets or ones you can train successfully.
It can be difficult to find good employees, so if you’re trying to expand into another region, consider whether you have adequate staff. Also consider whether you can afford the time and energy to hire and possible train new workers, because you’ll likely have to go through several people before finding the right fit for your business.
If you, alone, are the reason your business is succeeding, it will be nearly impossible to expand effectively. You can’t be in two places at once, so if you don’t have equally capable workers, it will be hard to grow your company.
Process
To be successful and avoid pitfalls to expanding a business, you need an effective process that reflects the owner’s goals and that its workers can easily follow without the boss around. The more organized the process is, the better it will work. Plus, you won’t need your employees to be as highly skilled if there’s a process in place that they can follow.
Once you have a process that works, write it down.
Product
When expanding into a new type of work, determine if different products will be necessary for the same or similar jobs. For example, products for a municipal building renovation are often different from those you install in a house.
Plus, product requirements for homes, commercial and government buildings vary city to city and state to state.
Price
When expanding into a new market, it can be hard to price a job. You have nothing to base your estimates on because you don’t yet know what the products are going to cost you. Without accurate estimates, you could end up losing money, and very quickly go out of business.
So find out where to buy products in the new market, as well as how much they cost and how fast they can be delivered. These two things are closely related, and you’ll often pay a lot more to receive a product more quickly.
−By David Dovell and John Gordon with Rebecca Torchia
David Dovell and John Gordon provided these tips during a recent Pro Construction Guide PROcast, a podcast developed just for pros. Dovell and Gordon host this regular podcast, which provides tips and advice that you can listen to anytime and anywhere. Dovell, a remodeler in North Carolina, and Gordon, a Home Depot executive, also host a weekly home improvement radio show.
