It’s surprising when someone comes to ask your opinion about a business they want to start, and the first thing they mention is expansion and opening new branches after they quickly launch…
I say to them: “But hold on, expansion what? You haven’t even started yet!” They reply: “No, we need to keep up with the market, become well-known, and for many other reasons!”
What’s strange is that this is no longer surprising at all. Many people think and operate this way now, as if the only goal is expansion, opening branches, and becoming a household name. However, what they really mean is visibility on signs, not actual marketing.
Let’s take a step or two back and set some rules on which we can base our actions.
Let’s agree on two main principles:
- Absolute profitability
- Absolute sustainability
The goal of expansion should be to benefit from it by increasing sales (absolute profitability) or increasing your market share to generate profitability that supports sustainability. It could also be about strengthening your brand by collaborating with another brand (Co-Branding), which could enhance your position in the long or short term, if you’ve studied these steps carefully.
But what we see today is extremely strange and should grab the attention of anyone specializing in business planning and design. Even stranger is that it continues, and people are copying each other’s expansion models without studying or thinking about how to expand and grow without a realistic plan.
This eagerness becomes the main reason for your losses (losing a large portion of profitability), and not just that— it might also be the reason behind closing branches that were profitable (losing sustainability).
As a result, expansion can lead to the loss of key employees that any business depends on. Imagine the disaster!
Here, I want to make it clear to anyone working in business, especially those with a startup, that there is an excellent author, not very famous in our Arab region but highly accurate, named Paul Jarvis. He wrote a great book titled “The Company of One.”
I expect this book will shock many people because it discusses the tempting issue of expansion in detail and tells you two very important things that are unfortunately missing from many people’s minds:
“People are so focused on rushing to apply the expansion model to get famous and attract investors, and if the investors don’t come or take longer than expected, we’ll gain more customers, our name will become known, and we’ll be a big brand simply because we have branches.”
This beautiful book explains that what you’re thinking about is “blind growth.”
What does “blind growth” mean?
It means that you haven’t considered all the opportunities for development, the opportunities for profit, partnerships, or contracts. Have you thought about solving mistakes and how to reduce complaints? Have you addressed these challenges while still operating from a single branch or with just a few employees?
If you’ve resolved these issues, then that’s the right time to think about how to expand and open new branches.
But will this improve your business model?
You may find that opening new branches might not be beneficial!
This is simply because opening new branches means entering a new market, new research, new competitors, new geography, new data, new employees, new salaries, and many new challenges.
On the other hand, opening new branches means new problems, new customers, new complaints… and other challenges that require strong and focused management to prevent losing control.
If you haven’t solved the old problems or taken full advantage of previous sales opportunities, it could be an uncalculated risk. Blind growth puts your business at risk, as competitors can quickly pick up on your mistakes.
Simply put, the idea of opening new branches just to become known or “bigger” than others is completely wrong.
Many companies that became famous didn’t go beyond two branches, and their success was due to a keen focus on details and maximizing every opportunity.
In contrast, many companies that opened hundreds of branches collapsed because they thought expansion was the solution to their problems. In the end, those branches became the reason for their downfall.
In a future post, I will share a famous example of failed expansion in a giant company.
Can you guess which company this might be?
Stay tuned and follow us, and if you have any business questions, let’s discuss and solve them together.
Don’t let anything distract you from your main goal, which is:
- Absolute profitability
- Absolute sustainability