5 Ways to Safely Expand a Business
Most businesses in the UK began as very small enterprises, with the owner/founder being the only stakeholder in the venture. It is how well they can scale up and expand a business operation that can be the difference between failure and ongoing success.
Those who are fortunate enough to have acquired a modest sum to invest may hit a brick wall if they put all of that money into a chunk of stock or larger premises. The value of the stock is only recognised when somebody pays the desired price for it, and until that time it is somewhere between potential profit and dead money.
One of the key mistakes that leads many businesses to fail at a very early stage of inception or expansion is that they commit to a huge financial outlay without a real insight into how quickly a return on investment can be realised.
With that in mind, here are 5 ways you can expand a business with reduced risk and capital outlay.
1. Diversify into a complementary product
If you feel there is no more room for growth in your core product or service, can you diversify your product offering? For example, a company selling perfumes and fragrances could move into skin creams and toiletries, as the target market is very much the same.
2. Enter a new geographical market
If you’ve had success in one region or country, see if you can take that tried and trusted model and apply it to a new region with a similar demographic and buyer behaviour.
3. Collaborate with trusted partners
Most companies that have traded for a couple of years will have come across suppliers or even competitors who may have some collaborative potential. If you get it right, you can create a synergy and be stronger together.
4. Run a dropshipping operation
In this digital age, it is getting easier to import items from abroad and there are lots of suppliers who will fulfill your orders without you ever needing to stock the products. This means a reduction in your profit margins but there is much less risk and outlay from inventory.
5. Use a third party logistics company to fulfil orders
If you store your goods in a third party warehouse, you may be able to further take advantage of their facilities by getting them to pick and pack your sales orders. This can involve putting the products into the right format and reworking with new labels or packaging. This saves resource because you don’t need to employ anyone to do this processing and you can still work out of your existing space.
Above all, success in expansion and diversification is always the result of careful planning and working out all the costs. If you can work well with economies of scale then you are at an advantage.
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