Why Do Many Small Businesses Never Expand?

There are several career options for a prospective employee to choose from. One can either take a job in a reputed company in any sector, take up a trade, join government services or start a small business. Starting a small business is a great option for those who want to be independent and are willing to take the risks which come with starting the business.

Starting your business comes with its challenges. A prospective and an actual business owner has to understand the nature of their businesses and understand the various strengths, weaknesses, opportunities, and threats associated with their businesses.

One of the biggest challenges a business faces that it does not expand. There are various reasons which explain it. It is crucial to analyse each of the reasons so that a prospective or an actual business owner takes note and ensures that his/her business does not fall into this trap.

The various reasons why some small businesses never expand are described below.

1. The Owner's Decision

Often, the nature and strategies of a business reflect the personality, needs and desires of the owner itself. Some owners are ambitious and want to make it big. Hence, they keep on expanding their business. Others are satisfied with what they have and are content with running it on their comfortable scale.

There is nothing wrong with it. Each owner has their ambitions and goals. However, if the owner does want to expand their business, they will need to reorient themselves and their goals to make it happen. The owner will need to take a more proactive approach and get ambitious if they want to get the results they are looking for.

2. The Lack of Right People

The business will never be able to achieve its goals if it does not have the right people. The 'right people' includes employees, managers, advisers, etc. You cannot build a business without having them work towards the same vision and passion as you do.

For that, you will need to keep assessing your employees and managers to determine whether or not they are up to the mark. If an employee's performance is not meeting the standards, you will need to motivate them to do better. If they are still not improving, you will need to evaluate whether the employee should be allowed to remain a part of your organisation.

You will also have to consult the right advisors before making any major decision regarding your business. Your advisors can make or break your business. If you are not getting the right advice, you will never be able to achieve the goals regarding your business.

3. Standards and Control

For any business to be recognised, you will need to maintain standards and have firm control over the quality. If you want your business to expand, you will need recognition from the customers.

If you don't get good enough recognition from the customer, you will not be able to make a name for yourself and not expand your business. A high consumer satisfaction rate can take your business forward, while a low consumer satisfaction rate will only ruin your business's reputation.

To maintain high standards, you will need to put systems in place that will control those standards. Without them, it will not be possible to maintain high standards.

4. Technological Infrastructure

To get ahead in this competitive world, you will need a solid technological infrastructure. It can be a boon as well as a bane for a small business. If a small business can utilise it efficiently, it has the potential to grow. These technologies are needed to expand the scale and, in turn, help the business expand.

However, in many cases, these technologies are expensive. Many small businesses need such technology if they want to expand their business. However, they cannot acquire it due to cost. Hence, they lose out to their bigger and established rivals.

If you want to handle advanced technology, you will also need the resources to manage them, including financial, technical, and human resources.

5. Lack of Direction

If you want to expand your business, you will need a proper direction. Suppose you have a shop. If you're going to establish another franchise, you will need to have a proper plan to achieve it.

"Which location to choose next?", "How to gain popularity in the next location", "What changes do we need to make in our strategy to gain a better result from our new franchise" are some of the questions one needs to ask before expanding.

If you don't have any business plan for expansion, it won't be easy to expand as you will be directionless. You will also need to plan the acquisition of labour, capital and location for your next expansion project. A lot goes into planning these things individually. To get these three together, you will need to invest a significant amount of effort and time.

6. Marketing and Advertising

Marketing is essential if you want your business to grow. There are many costs incurred in advertising, direct marketing, sales promotion and various other forms and marketing tools. Without using these marketing tools efficiently, it becomes challenging to expand.

Small businesses are at a disadvantage in this sphere. Large and well-established businesses have a lot of financial resources to take full advantage of marketing. They can easily hire an advertising agency's services and spend money on different forms of marketing. Small businesses don't have the kind of resources that big businesses have and hence, lose out.

Marketing is also essential for expansion. If you want to be successful in your next location, you will need to market your business and its products well to attract consumers. The small business will be competing with big businesses, and hence, the big businesses will always have an advantage vis-a-vis small businesses.

7. The Type of Products and Services Offered

If the small business sells a homogeneous product, such as fruits, vegetables, milk, and other generic products, it will be unfeasible for them to expand. Since there is not much difference between their products and their competitors' products in another location, it will be quite challenging to convince the customers to purchase your products rather than that of your competitors.

Hence, you will need strong branding if you want to expand. Strong branding will make expansion easier as potential customers will be able to identify with the brand and purchase the products.

8. Inadequate Investment

Any business expansion requires more inventory, equipment, capital, and employees, which requires a lot of investment in cash and credit. A business owner cannot arrange financial resources by themselves. He or she will need to approach lenders and investors to get hold of the financial assets.

This is where many small businesses are at a disadvantage. Many small businesses want to expand but cannot simply because they cannot arrange for these funds. A big business can easily get investors and lenders, but a small business does not have it that easy.

9. Lack of Innovation

Businesses have to keep on innovating to stay relevant in the market. Many small business owners stay in their comfort zone and refuse to innovate.

The market does not stop for anyone, and if you don't innovate, you will not be able to reach out to new customers and close in on the cut-throat competition. You need to make changes to your existing products and introduce new products if you want to gain prominence and maintain your current reputation.

10. Attitude towards Customers

A positive attitude towards your customers is as crucial as anything can be. You need to ensure that your customers are satisfied with your business. This will help you get good word of mouth, which will, in turn, motivate you to expand your business.

If you do not have a positive attitude towards your consumers, your business won't expand.

These key factors play a crucial role in determining whether your business will expand or not. If small businesses do not take care of these factors, they have a very slim chance of expanding.

However, you don't need to worry. If you take care of these factors, you will be able to expand your business and meet your goals.

Also read:

1) Best Tips for Customer Retention for a Small Business
2) Tips to Understand Your Market while Starting a Small Business
3) Tips for Businesses to Overcome the Covid Blues - Revival Tips for Businesses
4) What are the keys to success when operating a small scale business?
5) OkCredit: All you need to know about OkCredit & how it works.

FAQs

Q. Does an Owner's personality play a key role in business expansion?

Ans. Yes, an owner's personality does have a role in business expansion. If an employee is ambitious, the business will be geared towards expansion.

Q. Is technology essential for expansion?

Ans. Yes, technology is essential for expansion as, without it, you will not be able to produce at scale and expand.

Q. How much investment is required to expand our business?

Ans. There is no specific amount of investment required. However, if you want to expand, you will need to invest in labour and capital significantly.

Q. Is consumer satisfaction required to expand the business?

Ans. Yes, consumer satisfaction is required to get a good reputation. A good reputation will help you expand, as it will help you gain more customers quickly as you grow.