When most people use the phrase “business expansion”, it usually means that the business will be marketing its product to a wider consumer base, in order to increase sales. While this may be true, there are many other ways a business can expand. These can include:
- Selling more of the same product
- Widening the range of products or services that are sold
- Selling a completely different type of product
- Changing the underlying concept of the business
Anytime a business engages in expansion, it’s necessary to ensure that the business is following the various laws and regulations in the area. With increased business activity comes an increased responsibility to provide safe products and/or services to the public. Business expansion can take two main forms: Planned Expansion or “Unexpected Growth”.
Planned expansion of a business occurs when the business management intends to expand activities. Accordingly, the board will usually create a suitable business plan to implement the company’s goals and aims. In some cases, planned business expansion may actually be necessary in order to avoid losses associated with unexpected changes to the market.
While each expansion plan will differ according to the company’s needs, planned business expansion can be based on a number of actions, including:
- Introducing new products into the market
- Transferring an existing product into a new market
- Starting a business chain or franchise
- Business growth through merger, acquisition, or takeover
- Marketing the product overseas in foreign markets
Planned business expansion can therefore be a major undertaking. It’s often compared to starting a business from scratch, except that the planners may have a minimum base to start the project with. In most cases, it’s necessary to work with a business lawyer for assistance with business laws and regulations (especially for expansion involving an acquisition or takeover).
Unexpected growth is where a business experiences significantly more business than is expected or planned for. This usually means more profit for the company, but it can also force the organization into a situation requiring rapid adaptation to the growth.
In fact, for many businesses, unexpected growth can actually spell more trouble than benefits. For example, a small business may have inadequate cash flow to handle the increased number of orders, due to lag time between sales and cash collections. This is especially true where customers have paid in credit or have made promises to pay in the future. Such unexpected growth can lead to more bills for the company, and in some cases, can lead to bankruptcy.
As a result, many small businesses purposely choose not to expand in the face of unexpected growth. When engaging in start-up business planning, every company should be prepared for what to do if they experience unexpected growth in sales.
In order to avoid business failure due to unexpected growth, it is generally necessary to hire a business lawyer for advice and representation in court. An experienced business attorney can help you during business planning, and can help make sure that your company will be able to accommodate major changes in the future.