Small firms: How to expand

Image caption Tom Ryan says small firms must have the funds in place to be able to afford to expand

Any small firm that has tried to expand will tell you that it is a risky business.

Expansion, be it adding extra staff, new product lines or more retail locations, brings a wealth of potential problems.

Here, Tom Ryan, founder of Smashburger, one of the fastest-growing companies in the US, looks at how small companies can best avoid expansion pitfalls.

Mr Ryan is a member of our panel of entrepreneurs, who have answered your questions on running a business.

He is joined byDieter Burmester, founder of luxury German hi-fi company Burmester;Ron Mahabir, co-founder of Singapore-based Asia Cleantech Capital, which invests in green energy projects; andEric Ries, Silicon Valley technology entrepreneur and start-up adviser.

Also on the panel areJulie Meyer, the boss of London-based investment fund Ariadne Capital; andIan Livingstone, life president of computer games business Eidos.

Your questions answered

Andy Brown from London asks:I run a small (40-person) professional services business.

We have a core offer that clients love, but historically the firm has always struggled to scale up.

Any tips on the factors to assess when looking to expand? Thanks.

Tom Ryan, says:Andy, the decision to scale up requires serious consideration. Here are some important factors to consider:

  • Make sure your talent pool is wide and deep enough to handle the dilution that expansion naturally causes - the integrity of your core business needs to stay intact
  • Assess the demand for your core offering, and take as little risk as possible in your first few expansion efforts - scale allows more risk... later
  • Be well capitalised for any expansion plans
  • Train, train, train - make sure your expansion teams are well versed and trained in your core business and culture.

All in all, metered growth that allows you to expand with the strength, expertise and culture of your core is key to long term, expanded success.

Sarah Haddow from Stornoway asks:I'm just in the process of setting up my own business from home.

I will be making custom-designed gifts, and also hope to make customised stationary supplies for businesses.

I have set up eBay and Paypal accounts, and will be setting up a business account and website.

I would like to know the most effective ways to advertise and promote my company.

Dieter Burmester says:Dear Sarah, I can certainly share my ideas for promotion with you.

Image caption Dieter Burmester says that personal recommendations should not be underestimated

I believe that one of the most important things is to spread the word in your personal environment. Get your personal network working for you.

Accounts with eBay and Paypal and things like that are very important, but don't forget that gifts are from people for people.

A personal recommendation is so much more valuable than any kind of advertisement you can initiate.

You can also approach businesses that might have a need for gifts and merchandise articles. Write a personal letter and introduce yourself.

There is also the possibility to use social networks like Facebook to promote your business, but I would be very careful with this kind of media.

Anne-Marie Bell from Hertfordshire asks:Having been made redundant at the end of last year, I decided to set up my own business as as personal assistant (PA).

I am a sole trader, and I have done all the groundwork such as the website, business cards, joining associations and the insurance.

I am now ready to market my business to find clients. However, I am struggling slightly with this.

I have listed the business on a leading directories website, taken out an advert in my local paper, and joined an online networking service. However, I'm not sure where to go from here.

Can you help? Any guidance or suggestions would be very much appreciated.

Ron Mahabir says:When I think of online PA services, my first thought is of $2 (£1.30) per hour virtual assistants (VAs) available through websites based overseas.

Your brand is Anne-Marie Bell, not an impersonal, high volume offshore VA service that competes primarily on price, so you definitely want to keep that distinction clear.

Image caption Ron Mahabir advises new small firms to be distinct

It also does not mean that you can't execute your PA services in a virtual manner, but online marketing and newspaper ads for your premium, personalised service will be a challenge.

You know your target clientele best, but it would seem that this would involve more personal connection in securing and servicing them.

How much offline networking have you done so far? Is there a large enough pool of executives in your area that require PA services?

Marketing of premium services to executives generally requires word-of-mouth referrals and a significant amount of personal interaction.

Congratulations on the new business and best of luck with it.

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