Why Nigerian Businesses Fail: Premature Expansion

Why Nigerian Businesses Fail: Premature Expansion

This is the fourth installment in our ongoing series, Why Nigerian Businesses Fail. Read the preceding parts here.

4. Premature expansion

Emboldened by an injection of cash or favourable economic projections, businesses sometimes bite off more than they can chew. And while growth is a good thing, expanding a business without first developing structures to handle the pressure that comes with growth will spread resources too thin, eventually destroying the business.

Before you expand your business, you must:

i. Be sure your expansion plan is in line with your vision for the business.

There could be several gains from an expansion, but if they do not drive your business toward achieving the primary goals you have set for it, what's the point?

ii. Check to see that your business model can handle an expansion.

How profitable is your business now?

If it is not satisfactorily profitable, expansion will pile on pressure and wreck it.

iii. Have a projection of customer growth.

Expansion typically means your business will have more customers. To avoid a decline in the quality of your customer service, you must make a proper plan to deliver consistently good service to new and existing customers otherwise your reputation will be damaged.

iv. Be sure you have the resources necessary to expand smoothly.

Expanding your business will require capital, human resources and infrastructure. Before you expand, create a budget to have a clear picture of what you will need and how much those needs will cost you. If after creating a budget, you decide to go ahead with your plan, secure the required resources (hire staff, develop infrastructure etc) well in advance to avoid issues during the expansion process.

v. Set a reasonable timeline.

No one is superhuman. The best way to manage expectations with an expansion is to set a timeline you and your staff can work with practically. Break your expansion plan into small goals and track your progress. Such small goals are easier to achieve without creating unnecessary pressure.

The bottom line:

We believe every Nigerian entrepreneur wants their business to grow, but growth isn't always about expansion. You can also grow your business by improving the quality of your current offering(s), delivering better service and fine-tuning your business model. Don't expand till your business is ready for it.

Comments, tips and questions are always welcome. Post yours in the comments section below or send it to hello@margin.ng. We look forward to hearing from you.

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