Industry news — Can expanding your business do more harm than good?

Can expanding your business do more harm than good?

Expanding into additional facilities can do more harm than good to a business if it is not done correctly, especially in niche markets.

Pick up any trade magazine and somewhere there will be a story about a company opening a new facility or expanding into a new region. Often there is a photo with it showing the owners grinning proudly outside the front entrance and sometimes a ribbon is being cut with giant ceremonial scissors.

Despite the happy scene and snappy suits, opening new buildings, satellite offices, or regional facilities can be incredibly stressful, bad for business, and worse for customers. It is very often done in a hurry, at great risk, and without the right planning. I’ll come to some practical guidance but first want to look at the major difficulties I hear about Australian businesses, and in turn their customers, experiencing.

It can be a case of trial and error before getting an expansion right, but there are ways to stack the odds in your favour.

The thing about growing a business, especially geographically, is that the world is much smaller than it used to be.

Therefore, the reasons for companies to setup in a new city, state, or location are different to what would have driven them before the internet, smart devices, and social media. Too many people apply the theories of their grandfathers and fathers to a modern world that is changing so fast even millennials are struggling to keep up.

The biggest change has been that now smaller companies have access to the decision makers on large contracts and projects. Once upon a time only a handful of national businesses in any sector could bid for the most lucrative contracts. These big names had easy pickings, while the rest of us were serving the contracts and customers that were too small for them to care about. That’s changed and the impact is two-fold: first, it’s a more level playing field and, second, the hallmarks of smaller, often family-owned companies—customer service, ethics, etc.—are becoming more in demand.

It means the way businesses expand is more important than ever. Let’s look at three boxes that need to be ticked:

  1. Customer service

Growth is one of the most misunderstood concepts in business. To me, if it’s not adding to the bottom line and customer experience, what’s the point? The often-overlooked criteria of an expansion plan are that existing customers must be guaranteed the same level of service (or even better if it frees up resources) and new or prospective clients must be given the same world-class service that the business has been built on.

I see and hear about so many large businesses, many of them with powerful brands, that use cashflow and capital to bundle into new markets at the expense of existing customers and without delivering a high level of service to the new ones. Anyone can plan an expansion in a spreadsheet but in the real world it takes more than that. Here we look at the specifics that companies can do to avoid this but it’s also necessary to emphasise, one, how widespread bad growth practice has become and, two, how much harder it will be for businesses resistant to change.

A fact of the modern world is that word travels far and fast. If a company sets up in Brisbane having enjoyed some success in Sydney, but the new venture falls short of the same customer service standards, people in Sydney will know about it. When an email or social media post complains about a late delivery or unavailability of a service representative in one city, the brand and company name is damaged everywhere.

  1. People power

My golden rule is that we don’t step off our threshold until we’ve got the people in place to take us somewhere and get us home again safely. Think of it as a child and their guardian. All businesses are vulnerable—many would go into the red after only a few bad months—and their guardians are the people that represent them on the front line and keep the house in order behind closed doors. Ranger could have moved into Melbourne years earlier, for example, but only when the right person to lead the project became available did we take the plunge.

This article isn’t about my company, but it serves as a case study, nonetheless. I make no secret of our ambitions to become the country’s biggest force within the lifting marketplace. However, we understand that to achieve that we must expand steadily and astutely, only when personnel and market conditions allow us to implement growth plans. With the right person combining with the booming construction market, we were confident this significant step was the right one.

Too many large companies give the responsibility of a regional operation to someone that isn’t suited to running a business. They might sell a lot of rigging gear, or shift a bunch of machines, but as a leader focussed on client service and quality control they’d score 5/10.

A customer wants to be able to trust their supplier to be able to inspire their purchasing decisions, deliver on time, and back it up with great service. They don’t want to fear that every problem they raise will be referred to someone hundreds of miles away or each delivery travelling the same distance by truck or plane.

The importance of this is magnified in niche sectors like the lifting industry where technical knowledge is paramount. Customers are demanding and nearly always time poor; they need questions answered quickly and accurately. It also helps if the lifting equipment supplier can make technical recommendations even before those questions arise.

A business should have the same overarching values and ethics. It must feel the same wherever it’s touched. But each office or facility has got to be a business within its own right. Actually, this is a faster way to achieve common, ambitious goals than micromanaging regional offices from a central location. If it makes sense to implement a strategy designed by the Melbourne team, we can improve its chances of being successful by supporting it with resources and expertise from Sydney. At the same time, we won’t stop an initiative just because it might not exactly align with how we work here at the main office.

Too many large companies give the responsibility of a regional operation to someone that isn’t suited to running a business.

  1. Give yourself a chance

Business should be challenging but there’s no shame in going after low-hanging fruit. It’s a mistake to make the early steps in a new market uphill. By that I mean a sensible strategy will be based on identifying common ground with the head office and / or other regional facilities. If a company is built on rigging gear, don’t immediately build an expansion on forklift trucks. Of course, an offering must be tailored to the marketplace, but it helps if the products and customer base are broadly similar. For us, there were strong synergies to note between the Melbourne and Sydney markets.

The leader of a new venture has got to be sure to sit in that middle area between running it like it’s their own, but not being too proud to ride on the coattails of the existing company where possible. If it worked before, maybe it’ll work again. It can still be overseen with independence. If new markets emerge as time goes by, all the better.

The best advice we received was to calculate all the risks and give ourselves the best chance of succeeding. Think big but like a small company if you want to make it into orbit. The world is now a small place too.