Growth Club
1851 Growth Club
The Pros and Cons of Scaling Your Business
Whether or not you decide to expand your operations, remember to take these pros and cons into consideration.
Hoping to run a successful business is one thing, but dreaming to one day expand beyond a single location is an entirely different game.
Whether it’s opening up additional locations, expanding the menu or hiring additional staff, scaling a business is not a decision that should be made lightly. Many restaurants have tried expanding before they were ready, only to struggle with properly managing a larger business. But there are plenty of success stories, too.
Before making the leap, Marc Glazer, the president and CEO of BFS Capital, has a few pros and cons to consider.
Con: More expenses
More revenue doesn’t always mean bigger profits. Every additional storefront or menu item comes with an added cost, and it can be difficult to predict what those costs may be. For example, opening a new location might mean more consumers have access to your food. But the location may be difficult to access, there may be too much competition in the area or you underestimated the local population’s demand.
Pro: Economies of scale
Creating economies of scale is one of the best ways to boost profits. If you can produce 100 units of something for the same price that it previously cost you to produce 75 units, then those extra 25 units are pure profit.
Con: Supply chain management issues
Managing a larger business isn’t easy, and it takes many years of experience to maximize every efficiency. Supply chain management involves streamlining a business’ supply-side activities to maximize customer value and to gain a competitive advantage in the marketplace. Every part of the chain needs to be operating smoothly to ensure that there aren’t delays or other problems along another segment of the chain.
Pro: Larger workforce
Scaling your business allows you to also expand your workforce, whether it’s a handful of new employees or 100. A larger staff allows your business to pursue many more opportunities from both a sales and marketing standpoint, such as hosting a community event or participating in a cooking competition, without disrupting the daily flow of the restaurant business.
Con: Brand dilution
The downside of having a larger workforce is that not every employee may believe in your restaurant’s mission. This is especially true when expansion involves opening new locations. The employees you hire to staff the new location may not have the experience of working with you and your earliest employees, so they may not be as motivated to deliver the level of service your customers have come to expect.
