Q: How do you decide to expand a business?
A: As entrepreneurs, we are often so desperate to strengthen our businesses that we encourage the idea that all growth is good. That is often a terrible mistake. Growth should neither be thoughtlessly pursued, nor be left to chance. Growth must be strategic.
The important questions to ask yourself are, "What are my goals for growth?" and "How do we grow and remain unique?" There is rarely only one way to expand a business, so your strategic values and motivations ought to help determine direction. The choices you make about how to grow will determine the nature of the things in which you will need to invest: skills, resources and people.
For instance, geographic growth may involve expanding your business from a local to a regional or national market. You may need to hire new people, develop new technologies and possibly build new offices across the country. You may need real estate skills and to decide what technology platforms will help you serve distant locations. Internal communications will become more important.
Second, product-driven growth may require expansion of the range of products or services provided. You might need to invest more time in research and in partnerships. You may need to add expertise in developing new products.
Finally, growth through expansion into new customer segments may require investment in market research. You may need to attract new staff from different backgrounds. You may need to invest in data collection and data analysis techniques in order to target and satisfy new customers.
Each of these three different growth trajectories will make different demands on you and your business. You will need to direct your scarce money, time and thoughts. Depending on the timing and the market context, any of the three approaches described could succeed. It is important to emphasize that the worst growth strategy of all is to try all things at once. Attempting to grow without choosing a coherent strategy about what sort of growth is, and importantly is not, compatible with what will keep your business unique nearly always ends in disaster.
John F. McVea is an associate professor in the Schulze School of Entrepreneurship at the University of St. Thomas Opus College of Business.