As a small to medium-sized business, you may be in a challenging position: do you keep your business where it is, or increase its size and take it to the next level?
- If you decide to stay where you are right now, are you opening the door to lose business? Will your competitors lure customers from you by offering services you don’t have because you are limited by your current size?
- If you decide to take your business to the next level, you’ll need to put resources and systems in place first. If you don’t, you could be setting yourself up for disaster.
Here are two examples where companies failed to prepare and paid the price:
Wise Acre Frozen Treats
You probably haven’t heard of them because they weren’t around long. Wise Acres made frozen popsicles from unrefined sweeteners. The popsicles were organic and health-conscious, and consumers were enthusiastic about them. Jim Picariello started the company out of his kitchen in 2006.
The company got orders from natural food stores and major supermarket chains on the East Coast. At an Expo East food show, Wise Acres’s popsicle won the “Most Innovative Product Award.” That led to a contract with United National Foods, a national distributor.
Before they got the contract, the orders Wise Acres received were small and they had no problem filling them. The United National Foods contract orders were much larger than anything Wise Acres had ever handled before. In order to fill them, they had to expand their operation. Since they did not have the capital on hand, they needed outside financing.
Picariello estimated he needed about $1,000,000 for the expansion. He was able to get loans for about $500,000 from local banks and an investment firm. He started talking to a private investor for the rest. That led to a million dollar loan in the spring of 2008. But when the economic crisis hit later that year, the investor pulled the loan. Jim could not find the financing he needed anywhere else. By the end of 2008, Wise Acres was out of business and Piciariello went through a personal bankruptcy.
Huntington took the lead in the merger and rolled all of First Merit’s accounts into new ones at Huntington in early 2017.
Huntington did a fairly good job of keeping the First Merit customers informed of how the merger was supposed to go; the merger of the two banks was announced six to eight months before it actually took place.
But as the process unfolded, things started to unravel:
- Huntington had several call centers, but they underestimated staffing requirements needed to handle the volume of calls from the newly transferred First Merit customers. The call centers were understaffed.
- Huntington did not anticipate the questions the First Merit customers would have and failed to provide adequate training for the call center staff.
When a First Merit customer called, they had to wait a long time, sometimes 45 minutes or longer before a representative picked up the call. Then they were frustrated when the representative they spoke with was not able to help them.
Huntington never let anyone know about the problem at their call centers. They also never corrected it. Some First Merit customers closed their accounts at Huntington and opened accounts at other banks. They also let others know about their bad experience.
Seven Critical Factors for Sustainable Growth
If Wise Acres and Huntington had handled their growth properly, Wise Acres would not have gone out of business and Huntington would not have lost so many customers during their merger.
Before you decide to expand your business, consider the following 7 factors:
The company president and executive team have to lead the expansion; they need to spend whatever time is necessary on this. In the process, they may have to delegate some of the duties they had before to others in the organization.
Every business needs capital to fund their growth. If you don’t have the cash on hand and the business is not generating enough cash to fund your expansion, you’ll have to look elsewhere.
Common sources include banks, family and friends and professional “angel” investors. But watch out – it takes time to raise money, and terms can be extremely tough.
Determine the number of people you will need to handle the growth. They will need to be on hand to handle the additional work created right from the start. As new employees are hired, make sure you hire the right ones – they should have the same values and work ethic you and your current employees have.
Make sure all employees receive the training they need to handle any new assignments and responsibilities. Nothing is as harmful for a business as an employee not doing their job properly.
You will inevitably need to put new systems in place. Many small businesses start out using Excel for almost everything. But Excel just won’t cut it once you reach a certain point. If more elaborate software is needed, your people have to be trained to use it.
6. Customer Service
Keep a close watch on your customers. Make sure your business continues to serve all your customers as well as – or better than – they were prior to the start of the growth. Remember, your competitors are regularly looking to steal your customers.
Make sure you have the physical space and equipment you need for the expansion. If your existing space is too small, or you don’t have enough equipment, you could quickly hit a production wall. And if you can’t deliver what you promised, your customers will go somewhere else.
Every successful business experiences growing pains. But with careful planning followed by steady execution, you can minimize growing pains and maximize gains.
- Interview with Helena Swyter at SweeterCPA - September 13, 2018
- Two Ways to Grow Your Business - July 31, 2018
- The Driving Force of the US Economy - July 16, 2018
- What Goes Into a Restaurant Feasibility Study - July 10, 2018
- Business Assessments – A Critical Component in Your Company’s Success - June 4, 2018
- Interview with Valerie Drame’ at Drame’ Designs - May 31, 2018
- Why Restaurants Fail - May 29, 2018
- Great Business Leaders Delegate and Empower - April 26, 2018
- The People Behind Great Business Leaders - March 30, 2018
- Could Your Business Benefit from a Strategic Alliance? - March 9, 2018