It is a rule of thumb that most African start-ups
fail within five years of operation. Not all businesses around the
world thrive for up to two years, and the recorded 80% start-up demise
has been as a result of failed or inadequately structured expansion. In
other words, most businesses within the sphere of ‘failed start-ups’
(Small and Medium Scale Enterprises – SMEs) missed it at the point of
expansion, folding up after only a few months into a seemingly good
business venture.
Clearly, it appears that almost every start-up is gearing towards
expanding their business. It is a venture that most entrepreneurs look
forward to. However, there are underlined rules to this game and
essential considerations to be made.
Certain realization should accompany management’s decisions when
considering moving a business to the next level, or when it comes to
expansion – either by the introduction of a new line of product and
service, or an extension of an existing one.
Essentially, adequate research, planning and proper implementation
are the backbones of any successful expansion consideration for small
businesses.
The first reality that entrepreneurs must come to terms with, before
embarking on any form of expansion, is that it is not automatic, neither
is it a free meal ticket to financial boom and freedom. The notion of
making quick money or more profit, must be suspended for a while.
It is also important to undertake a thorough investigation of the new
course, the clime, the target market, cost implications in all
ramifications: financial capability and readiness, production, location
and equipment, if need be.
It is usually advisable to undertake the expansion in stages, because
over-enthusiasm and unfounded theories by entrepreneurs in small and
medium scale enterprises have led them to liquidation.
Expansion involves increased overheads, and if your business cannot
cushion the effect internally, it can lead to an untimely fold-up. A
thorough analysis and understanding of all factors involved in the
process is important, in order to withstand unforeseen or anticipated
challenges from competition, target market, market trends etc.
Finally, a good internal management culture and sustainability
structures must be in place… in case the project becomes more successful
than the company can handle.
Furthermore, a concrete internal system for checks and evaluation must be in place to measure progress and correct errors.
Are you ready to proceed with this?
Photo Credit: Gstockstudio1 | Dreamstime.com
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