Why Do So Many Businesses Fail When They Try To Expand?

People have a lot of different reasons for starting a business. Maybe they want to work for themselves and they don’t want a boss breathing down their neck, maybe they’re just really passionate about their product or maybe they just want to make their mark on the world. Whatever your reason for starting a business in the first place, you can’t deny that money has a part to play. It might not be your only motivation but expanding your business and making more money is a priority for most people, but this is also where most businesses run into trouble.

Growing a business is tough and a lot of people get it wrong. In some cases, making the wrong decisions and going about growth in the wrong way can kill the business completely. You’re going to need to put a lot of money into growing a business and if you can’t increase profits enough to make that investment back, you’ll end up in a difficult position. So, why do so many people get it wrong? 

There are a lot of different reasons that people fail when they try to expand their business but in almost all cases, it comes down to you. If you’re not running the business properly and making the right decisions, you’re not going to get anywhere. It’s easy to blame it on the economy or the fact that you don’t have the right people working for you, but in the end, if you make the right decisions, you will be successful. These are some of the biggest mistakes that business owners make when trying to grow their business. 

Starting Too Early 

This is a mistake that so many people make, and it’s a big one. You start a new business and a year down the line, you’re doing pretty well. You’ve got a fairly solid customer base and you’re making steady sales. That’s when you start to get excited and think about the endless possibilities of this amazing business that you’ve built, so you decide to pump a load of money into it and expand rapidly. But what happens in a few months when sales start to dip and you’re not bringing in enough money to cover your increased overheads? You run out of money and the business falls apart, that’s what happens. 

Just because you see some initial success, that doesn’t mean the business is strong enough to support rapid growth just yet. If you only have one or two products, you might find that sales start to drop after a while because you don’t have anything else to offer your customers. Sometimes, you might see initial success because you’re good at building hype around your products on social media, but what happens when people forget about you and move onto the next thing? A few good months doesn’t mean that you’re ready for growth yet, you need to wait until you’re seeing steady sales over an extended period. It’s also important that you start putting some money aside so if things do go wrong, you have a buffer to fall back on. Growth isn’t something that you rush into and if you try to expand too early, it’s going to backfire. 

Underestimating Your Own Success 

Overestimating your own success and growing before you’re ready is a mistake, but so is underestimating your own success. Sometimes, businesses are completely unprepared for the increase in sales that they see when they increase spending on marketing and that causes some serious problems. All of a sudden, they have loads of orders coming in but they don’t have the production capacity to actually make and ship all of those products. That initial surge in sales will soon fizzle out if you’re constantly telling people that you have a backlog and they’ll have to wait a long time for their products. That’s why it’s vital that you’re prepared to deal with increased demand before you start your growth attempt. If you’re only shipping small volume and using a local courier, you need to move over to a company like CTI Logistics Interstate that has warehousing capacity and a big enough fleet to start moving larger volumes. Without this infrastructure in place, you’re not going to be able to meet demand and that means a lot of frustrated customers. You also need to boost your customer service department because more sales means more potential problems, and everybody knows that a business with bad customer service is going to struggle. 

Not Building A Strong Enough Brand

Branding is at the centre of all successful marketing campaigns and if you don’t have a strong enough brand, your growth attempts are likely to fail. You need to invest some serious money into building a strong brand that your customers really connect with. Social media is a great place to start because it’s the best way to show people what you’re really about. Marketing has changed a lot in the last ten years and people don’t want a business that is ‘professional’ in the traditional sense of the word. It’s the businesses that have a real personality on their social media pages that are the most successful. Throw out any ideas of what you think a business should look and sound like and then you’ll be able to build a unique, interesting brand that people are actually interested in. You also need to focus on building your personal brand as well, because people are more interested than ever in the people behind the business. If people don’t like you, they’re not going to buy your products, it’s as simple as that. 

Bad Leadership 

All businesses need a good leader, otherwise, they’re going to fail. You can spend as long as you like hiring the very best people but if they aren’t managed properly, they won’t be effective and the business will suffer for it. In the end, it all comes down to you and how well you run your business so, before you start growing, you need to think about whether you have the qualities of a good leader or not. If you don’t, you need to spend some time working on yourself before you think about expanding your business. 

Expanding your business is always a big risk and you need to be prepared for that, but if you can avoid these common mistakes, that risk should pay off.