By Jeff Macklin

When planning to grow a business caution and care are needed. Growth has its risks, but the right strategy can deliver stability and long-term profits.

The first stage to growing any business is to identify the opportunities for growth through analysing the company’s turnover, market share, profit, sales, strengths, weaknesses, opportunities and threats.

Even if you are happy with the current performance of the business it is important to keep looking for ways to develop so as to continue to grow the business and to keep ahead of the competition.

To increase market share a business has to do better than its competitors or attract new customers. Achieving this requires an in-depth understanding of both your customer base and your rival businesses.

Many small businesses grow through diversification although limited resources can present risks. Businesses should carefully weigh up the risks and costs of opting for growth against the benefits.

Diversification can take several forms, including launching a new but related product or service to the existing customer base, finding new markets for existing products or launching a new product or service to a new market.

Deciding how and when to diversify needs thorough market and customer research so that a clear development strategy – including trialing a new line or service for a short test period — can be developed before totally committing to the new project.

You will also need to establish sales levels, marketing tactics and identify supply chain operations that can cope with the added demands.

You should be clear about development costs and identify alternatives should any delay occur in development. Wherever possible, try to control risk by securing orders or commitments in advance.

While diversification can pose some risks, it also puts you in an advantageous position if changes occur in the market. Put simply, if you supply one product or service and it falls out of favour with customers, it leaves you very exposed. If you have two or more products or services and the sales of one of these drops at least there will be revenue coming into the business through the other. However, be careful not to diversify too quickly, as you could lose focus or dilute your core product or service.

You can also expand your business by joining forces with another business. While this creates more shared decision-making leading to possible management and staff issues, there can be clear advantages.

Whichever option you choose, it is essential to ensure you make a return on your investment. If you are not going to increase the figures on your bottom line then it proberly isn’t worth pursuing.

Jeff Macklin is Non-Executive Chairman of FDUK, providing experienced part-time finance directors to fast-growing businesses across the UK – www.fduk.co.uk