Why expand during a time of uncertainty?
There are a few reasons why expanding might make sense. For starters, there may be less competition as other companies cut back on marketing and advertising. You might be able to take advantage of the weakened competition to gain new market share.
Shifts in the job market might also present opportunities to hire talented but recently laid-off employees who would be more difficult to attract during boom times. These employees could provide the experience, knowledge, and expertise you need to take your business to the next level.
Do’s and don’ts for business growth in today’s economic environment
Do: Create a business growth plan.
To grow during times of uncertainty, you’ll want to make adjustments to your business plan. Along with broader economic conditions, your aims and motivations for expansion should dictate the shape of those changes.
“If you’re expanding because you’ve spotted weakness in a key competitor, then the question most must answer is, ‘Is it more efficient to buy or build that particular capability?’” says Calfo. “With that at the core of your growth plan, there’s a better chance you’ll be prepared, focused, and flexible—even if aspects of the economy are shaky.”
Do: Calculate costs in detail.
There’s a price to growing your business in terms of the resources needed to accomplish your growth goals. Generally, it’s an equation of reward opportunity, risk tolerance, and timeframe that needs to be solved. For example, you may need to hire more employees, buy or lease new equipment, purchase more inventory and raw materials, invest in marketing and advertising, or acquire more office or warehouse space. Calculate how much expansion will cost and determine how you’ll pay for it, such as by taking out a business loan or taking on an equity investor.
“If you’re expanding through M&A, the headline cost of the acquisition could be cheaper,” says Stevens. “But you also have to take into account the increased cost of capital in this rising-rate environment.”
Don’t: Blindly raise prices to fund expansion.
Customers generally become more price-sensitive during economic uncertainty and more aware of the value offered by products and services.
“Raising prices may be unavoidable to support underlying cost and labor increases,” says Stevens. “Ultimately, continuing to deliver a valuable and differentiated work product to the customer is a must.”
Remember that value is in the eye of the beholder, so it might be smart to ask your customers what they think is valuable and what isn’t.
Don’t: Neglect your existing business.
In other words, don’t bite the hand that feeds you. When executing growth strategies, owners and managers sometimes lose focus on their existing customers, which can lead to lost sales and falling revenue.
Part of determining whether expansion will be a benefit or a risky endeavor is being honest about your ability to evenly split your focus. If the deal has the potential to lead to distraction, you risk jeopardizing operational excellence in your core business.
Do: Spend to deliver top-notch customer service.
This is one way to make your business stand out from the competition and boost customer loyalty, both of which are critical to growing a business. Calculate what you plan to spend to provide great customer service. For example, you may have to invest in technology to free up employees to spend more time serving customers, budget for employee training, or even build new physical or digital spaces for customers.
“In times like these, you absolutely cannot afford to be underinvested in customer relationships,” says Calfo. “Anyone who isn’t working to strengthen them is going to have a tougher go of maintaining, let alone expanding, their business.”
Getting started
There is risk involved in expanding your business at any time, but it may be elevated during times of uncertainty. Will the rewards be worth it? Your Truist relationship manager can partner with you to understand where your company is in its business lifecycle and assess the potential benefits of pursuing a growth strategy in the current economic environment.
