The pros and cons of expanding your business

Entrepreneurs all dream of making it big, but sometimes the risks of growth can outweigh the rewards. We take a look at the pros and cons of business expansion.

Choosing to grow your business or maintain your current state is potentially one of the biggest decisions you can make as a business owner. Do you scale up and risk the danger of compromising your core business? Or do you stick to the original plan and refine your product or service? Here are a few considerations to help you make a case for or against growth and business expansion.

If your business makes products then, put simply, the more you make, the better your chances of lowering costs. So, theoretically, when you expand, you can expect to achieve greater economies of scale. For example, if you're in the business of making gourmet ice cream and you decide to open another store, you'll need to make more ice cream. This means you can start buying the necessary ingredients in larger quantities, which will hopefully reduce the final cost of goods sold. In this ideal scenario, you increase purchases and improve the potential for profit. Good times.

On the other hand, growth is expensive. Before you see the positive return of all those sold ice creams, you'll need significant capital investment to open new stores, invest in more equipment and hire more staff - not to mention ingredients. If you're ready to take that leap, fantastic. But if you've already achieved financial stability with your current business, and you're living a lifestyle that ticks all the boxes, you might think twice about incurring additional risk for further growth.

The bigger you get, the bigger you get - that's the power of expanding your business and widening your market. Take Boost Juice, for example. Australian entrepreneur Janine Allis opened her first Boost Juice store in 2000. The business scaled up so fast, adding 28 new leases in just 18 months. Today, Boost has over 580 stores in 13 countries. Through hard work and a smart business expansion strategy that used the support of franchisees, Janine and her team managed to corner the market on healthy juices. As they say, the rest is history.

While Boost Juice is a fabulous success story, rapid growth like this can put a whole new set of demands on a business. Suddenly, there are multiple locations, more staff to manage or more orders than you can cope with - which usually requires owners to delegate operations and other areas of the business to other people. This isn't always easy if you're used to running the show and controlling your brand. Another downside of business expansion and increasing your production is a potential decline in quality and, as a result, lost customers. For small businesses that are still honing their products or services, staying small and agile can actually benefit the brand in the long run.

While growth is an important part of any business, making sure it happens at your own pace and putting your foot on the brake when you spot trouble are important too. Weigh up what works for you and remember that one size never fits all. For more advice on expansion, see our interview with the fastest growing legal tech company about successful business growth.

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