For many businesses, growth is a core objective. Bigger sales, higher profits and greater geographical coverage all help your business generate more income for shareholders and employees. However, some businesses may need to limit - or stop entirely - their growth, if it is not in their best interest.
Reasons for limiting business growth
There are several reasons why you may want to control your business growth. You may, for example, grow too large too quickly which can expose you to the risk of overtrading. Other key considerations could be:
- the length of time to reach profitability
- the willingness to accept additional risks associated with growth
- the desire to stay below the thresholds for certain legal requirements
- ensuring the growth is sustainable and within your financial comfort zone
Planning is the key to dealing with problems arising from business expansion. You should:
- prepare a business plan for growth and keep under regular review
- use key performance indicators (KPIs) to assess business performance
- change strategies if you fail to meet your objectives (or stop when you do)
- have anexit strategy in place alongside your growth plan
If you decide to stop growing
If you come across serious problems due to business growth, and you're unable to resolve them, take action without delay. Putting off the decision may only make the problems worse.
Stopping or reversing growth isn't an indication of failure on your part. If you stop your business' growth and successfully consolidate, it is important to learn from the experience before starting afresh. Identify the factors that caused problems and put strategies in place to prevent or tackle problems in the future.
You should also use the expertise, facilities and funding that you have gathered in your business so far as the basis for the next stage of business development.