Business expansion: opportunities and pitfalls

Growth is an important objective for almost every company. It can bring many opportunities for your company, but you also have to watch out for the pitfalls. You can read more about it in this article.

The development of a company usually follows a fixed pattern: start, grow or scale-up, maturing and stopping. Sooner or later, entrepreneurs will have to deal with the pros and cons of expanding a business

When to expand your business?

Business expansion offers entrepreneurs additional options to make more profit. It can also solve problems, for example in response to increasing competition.

Expansion can be done in all kinds of ways: hiring extra employees, advertising more, entering into collaboration, introducing new products or services, starting online sales, acquiring another company, or by merging. By becoming active abroad, entrepreneurs can also tap into larger (emerging) markets.

Ask yourself at least these three questions in advance

Whichever approach you choose, remember that growth can also be a disruptive force that can affect your company in all kinds of ways.
Ask yourself the following questions beforehand:

Do you want more tips & tricks to expand your business?

Do you want to know more about how to control the risks and grow your business safely? Discover our whitepaper about how to prepare the future of your company full of useful advice and practical tips.

Discover our whitepaper

	Is it the right time for business expansion?

Check with yourself whether the following indicators are green:

The demand for your products/services is growing steadily
Every year you make a healthy profit
You have the costs under control. You are not afraid of surprises
You have enough money, people and equipment for the expansion
If do you need extra money, you can count on the cooperation of the banks or investors

	What are the benefits of expanding a business?

By expanding, you make your company more resilient to external risks, such as competition or technological changes. Growth can also strengthen the financial viability of your company. For example, larger companies are often more attractive to investors and lenders.

More specific benefits of expanding your business:

A larger and more diverse customer base makes your company less vulnerable to that one big customer who drops out.
Expansion of scale allows you to spread risks around better. By operating in multiple markets or by carrying different products, you can spread costs over more markets/customers and reduce the cost of doing business per customer.
By scaling up, you can purchase more efficiently and spread your marketing costs over larger sales numbers.
A bigger company gives you more market influence. You are stronger in determining the market price that you want to use.

	What are the disadvantages of expanding a business?

Some common drawbacks of expanding a business are:

Need for additional working capital. You may need to borrow money to buy new property or expand your fleet.
Need more capital to run the business. A larger company typically requires more staff, more facilities or equipment, and higher investment.
Loss of control. Due to the growth of your company, it is necessary to delegate tasks. There may be several branches. This can lead to reduced quality and lower morale of the staff.
Overload. Personnel and machines may not be able to handle the increasing workload.
Larger and possibly more unknown debtor file. There is a chance of an increase in debtor risk when you expand your business. When exporting abroad, the unknown debtor can also affect your cash flow.

One of the biggest mistakes is to expand too quickly. This could put your business at risk. Too fast growth can put all aspects of the company under great pressure. It can just pull you into a downward spiral.

Do you want to read more about the opportunities and risks of growth? For example, because you want to take the step to a foreign market?

Discover our section dedicated to grow and export

Protect your business against payment defaults

Protecting your company has never been so important than now. Especially in this crisis period, you are never safe from the default of payment or the insolvency of one of your customers. Very often bad payments and insolvencies lead to a snowball effect. A trade credit insurance protects your business against the risks of defaults of payment and insolvencies of your customers. You can look towards a prosperous future:

We monitor the financial health of your customers
We take care of the collection of your unpaid invoices
And we compensate you when your customers don’t pay

More information about trade credit insurance

Do you want to receive more tips ? Subscribe now and receive our Allianz Trade Magazine (bimonthly)

SUBSCRIBE NOW

Ensure the growth of your business

A successful entrepreneur is not afraid to take some risks. – but never blindfolded. Enable your business to innovate and grow by taking these tips to heart.

More information

What are the current risks of doing business across borders?

Doing business abroad involves risks. You will discover the most current risks in this article.

More information

Guarantees for international trade

Why are sureties and guarantees important for international trade? Discover the interview of our expert in sureties and guarantees to find out more.

More information

Four steps to managing economic risks

How can you handle this international vulnerability of your company? How can you continue to grow internationally? We offer 4 measures to manage your risks.

More information