Friday, May 30, 2014

Growing Your Business? Evaluate The Risks First

Sometimes business growth happens naturally. Other times, you have to take a big risk to make it happen. But how do you know if your risk will pay off?

We took a risk recently—after working from home for 10 years, my husband and I just opened a brick-and-mortar shop in an office building. I know—most book stores are closing their doors instead of opening new locations. But we decided to buck the trend, and are very happy that we did.

Before taking this risk, we evaluated why we wanted to grow, how it would affect our current situation, and how it relates to our long term vision for our business. There’s no foolproof way to know, but here are some things to consider when analyzing the risks of growth:

1) Potential to Meet New Customers

Will you have the opportunity to tap into a new or expanding market that you are not currently reaching? Taking on more overhead is always risky, but your revenue will increase if you can grow your customer base. You have to spend more to make more, right? But taking on too much too soon can also be disastrous. Assess your current overhead and how easily you can cover it. How much do you think you could increase your expenses if the new customers never materialize? This will be the hardest thing to predict, so a contingency plan could save you if what happens is your worst-case scenario.

2) Experimenting

It’s often less risky to “spread the risk out” over several different operations rather than one big (expensive) one. You can experiment with different types of growth– offering new products, expanding into a new market (see above), networking with other businesses, traveling to meet new customers, or hiring new employees. It’s not all about revenue– these are ways that your company can grow in size, power, and stability.