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 so 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 such as 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.
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