Should I grow my business?

Growing your business makes sense when you have strong reasons and clear readiness signals, such as consistent profits and operational stability. Rushing expansion without preparation risks problems, so make sure to assess your business realistically to ensure sustainable growth.

Reasons to grow your business

There are several reasons that motivate most businesses to grow. Common drivers include:

• higher profits - increase in sales usually leads to more revenue
• more customers - the volume of customers may give you greater security
• cost savings and efficiencies - achieved through economies of scale
• greater market dominance - to guard against smaller competitors
• risk mitigation - achieved through diversification of production and sales

Read more about the advantages and disadvantages of growing your business.

When to time your expansion?

Businesses typically grow after establishing stable operations, not during product launches or crises. Key indicators you will want to see include stable, predictable income, proven demand, good team capacity, and clear goals aligned with your long-term plan

Trying to grow too early, or trying to grow when your business is busy with other things (eg new product rollout), can be a mistake, as it is likely to split your focus. Match growth to your long-term goals and exit strategy, and avoid overextending when cash flow or other resources are tight.

Types of business growth

As well as your timing, it is also important to choose the right growth path. You can grow organically by selling your existing products to new markets or by selling new products to your existing customers. Alternatively, you can grow rapidly through acquisitions or aggressive scaling – these may lead to higher rewards but can be cash-intensive. Learn more about rapid and organic business growth.

Assess readiness for growth with a SWOT analysis 

A SWOT analysis helps you check if the timing and type of growth suit your business. It reviews internal strengths and weaknesses alongside external opportunities and threats. As part of this analysis, look at:

• strengths - what your business does well, like strong cash flow or loyal customers
• weaknesses - areas needing improvement, such as limited staff skills
• opportunities - external chances, like new markets and grants
• threats - risks, including competition or regulation changes

See a SWOT analysis example.

As well as analysing your own business, you should also examine the market you operate in and your competitors. 

For many businesses, growth signals success. It creates new opportunities, brings in more customers and generates greater profits. However, expanding your business isn't without risks. You should carefully consider the pros and cons of expansion before pursuing business growth.

Advantages of growth

Possibly the greatest competitive advantage of business growth is the ability to capitalise on economies of scale. As you increase your production output, you can bring down costs per unit and achieve savings across:

• purchasing - by getting discounts for buying in bulk
• marketing - by spreading the cost of promotion over larger sales
• overheads - by spreading the staff or administrative costs across a greater output

Business growth can also enable you to:

• increase your resources and stock
• generate more sales and profits
• reach new customers or markets
• put more money back into your business
• influence market price
• reduce external risks (eg from competition, market or technology changes)

Expansion can also give an impression of greater financial viability of the business. Financial institutions often see larger businesses as more credible and stable than their smaller competitors.

Diversifying into new markets, products and services means that if one part of your business is exposed to market changes, you can rely on other income streams. 

Disadvantages of business growth

Common challenges of business expansions include:

• shortage of cash - you may need to borrow money to meet expansion costs, eg buy new premises or equipment
• compromised quality - increasing your production output may lead to a decline in quality, which can lead to loss of customers or sales
• loss of control - as your business grows, you may need to delegate management duties or divide the workloads between different locations
• increased capital requirements - a larger business means a larger workforce, more facilities or equipment, and more investment
• increased staff turnover - for example, if staff are given extra work, their morale could drop, their productivity could decrease or they could leave your business

It's important to understand that growth can be a disruptive force. It can affect every single aspect of your business and put pressure on your staff, resources and finances. This is why you need to match your growth capacity and plan carefully to be absolutely sure your business is ready to grow.

Follow some tried and tested tips to help you prepare your business for growth.

Determining the best way to grow your business requires a strategic plan and a good understanding of the different ways a business can grow. Slow, organic business growth is basic, but arguably the most effective means of growth. Rapid expansion, on the other hand, may be more profitable but often involves significant risks.

It is worth considering all types of business growth when assessing the best route for expansion.

Organic business growth

Organic growth typically takes longer than other growth strategies but tends to be safer. This is because you are growing by doing more of what you are already good at. You also have more time to develop the right capabilities to support and manage your expansion.

You can follow several paths to achieving organic growth. You can grow organically by selling:

• your existing product range to new customers
• your products in new geographical areas
• via additional distribution channels - eg the internet or a wholesaler

In order to sell your existing product range to new customers or in new territories, you may simply need to launch an advertising campaign or expand your sales team. See more on market research and market reports.

If you decide to use new distribution channels, make sure that this generates new sales rather than simply takes sales from your existing distribution channels. Find out how to increase your market share.

Another way to grow organically is to sell new products to your existing customer base. For example, if you are a travel agent you could also start selling travel insurance to your customers.

Rapid business growth

Rapid growth occurs within a short time, often in response to an unexpected opportunity (like acquisition) or sudden demand spikes. In this period, your staff, production levels or customers may greatly increase at speed. This can lead to certain risks and challenges, such as:

• cashflow shortfalls
• operational inefficiencies
• customer service issues
• outgrown premises

Businesses often have to take on a lot of debt to finance their growth. Fast growth also increases the rate at which cash leaves your business - your costs will grow to accommodate increased demand. All this means that, if growth spirals out of control, it can put your business' financial solvency at risk.

Find tips to help you avoid problems during business growth.

One way you can achieve rapid growth whilst minimising risk is by buying another business. You could buy the whole business, or you could just buy part of it. The business could be one of your competitors or it could be a business that would complement the range of goods and services you supply.

Growing a business is exciting but it will only be worthwhile if you can actually achieve and sustain growth. Before you rush into things, ask yourself first - is my business ready to grow.

Growth can affect every aspect of your business - from your cashflow to your premises, equipment, staff and IT systems. It is important to plan for these changes early to avoid bottlenecks that could derail expansion. Here are some things you should consider.

Finding new business premises

Firstly, you may need larger business premises to:

• store extra raw materials and finished stock
• accommodate new staff
• house any extra machinery that you will need
• accommodate extra visitors that may come to your business premises

You may be able to extend your existing premises to give you this extra space. Alternatively, you may need to move to larger premises.

Hiring additional staff

Growth demands people resources. You may need to hire additional people to:

• advertise for staff
• conduct interviews
• train your new recruits
• cover the expanded workloads

Read more about your options when recruiting staff.

If you are growing through acquisitions, you may be legally responsible for the staff from the business you are buying. Read about the responsibilities to employees if you buy or sell a business.

Scaling up your IT systems

You will also need to think about your IT systems and how to adjust them to handle expansion. For example, decide if you need to:

• upgrade your accounts, stock control and customer relationship management systems
• buy additional licences for your existing software
• expand your IT network or cloud capacity

See how to plan your business IT systems.

Finding finance for growth

Sustainable growth requires upfront investment of both time and money. If you are growing, and especially growing rapidly, the increased demand is likely to affect your cashflow. Learn the basics of cashflow management.

There are many reasons why a growth strategy can cause problems for a business. Common challenges include:

• poor market research leading to misguided expansion
• insufficient planning and unrealistic targets
• decline in customer service due to stretched resources
• lack of control
• inadequate management systems
• excessive workloads for staff, leading to high turnover and low productivity

Below are some key pieces of advice to help you overcome the challenges and problems associated with growth.

Plan your business growth

Poor planning is one of the main obstacles to growing a business. You should research the market you intend to break into thoroughly and don't set your sights too high. 

Financial planning is also vital. You have to invest money up front during the growth phase and the return on that investment can take a while to be realised. See more on financing growth and how to prepare a business plan for growth.

Maintain business relationships

It is also important that you don't forget to look after your existing customers while you are looking for new ones. Your competitors won't stop trying to take business away from you. Make sure you maintain your customer service levels and communicate with your customers regularly if it's appropriate to do so.

Another common problem during business growth is poor control, especially in the supply chain. The relationship with your suppliers is likely to be under strain during the growth phase. You may require increased stock, raw materials and other assets, so you need to ensure you have systems in place to manage all of these.

Manage and motivate staff

Employees are important in any business, but during the growth phase, you may need to hire additional staff. It is vital that you get the right people, so allocate enough time and resources to select skilled staff and train your new recruits.

You will also need to manage your existing staff carefully to ensure that your growth strategy doesn't lower their morale. To lead your staff through growth, communicate with them regularly, be clear on what you are trying to achieve and what you expect from them.

Manage your own workload

Finally, when a small business grows, the owner's workload increases. The larger the business, the more time it takes to manage it. Consider which of your tasks you can delegate to other members of your staff in order to free up your time to concentrate on key issues.

See more tips on how to grow your business successfully.

Watch this short video tutorial to understand what you should consider before growing or improving your business. It highlights timing, planning and risk assessment.