The Advantages and Disadvantages of Growing Big as a Business

Should I grow my business? It is a question frequently asked, and you’d think the answer should easily be yes. But many spent numerous days and nights pondering how such growth impacts their initial company vision.

When many companies launch, considering how to grow is not necessarily a concern, they are worried more about how fast should they grow? Online tutoring platform, Tutor ID answer some of these questions in their frank yet informative rundown of how to grow a business successfully.

For many businesses, growth signals success. It creates new opportunities, brings in more customers and generates more vital company revenue and profits. However, expanding your business isn’t without risks. You must to consider the advantages and disadvantages of growing big first.

Advantages of growth

Possibly the most significant competitive advantage of business growth is the ability to capitalise on the economies of scale. As you increase your productivity and profitability, you’ll be able to reduce costs and achieve savings in two key areas:

  1. marketing – by spreading the cost of promotion over more substantial sales, having a strategy of high-quality content and solid digital marketing in place.
  2. overheads – by dividing the staff or administrative costs across a higher output

Furthermore, when you grow, you’ll be able to:

  • increase your resources and thus offer more customer products
  • generate greater sales and profits
  • reach new customers and global markets
  • put more money back into your business
  • reduce external risks (for example from competition, market or technology changes)

Expansion can also provide an impression of the higher financial viability of your business. Financial institutions often see larger enterprises as more credible and stable than smaller competitors.

Diversifying into new markets, products and services mean that if one part of your business is exposed to market shifts, you can rely on other income streams.

As your company expands you won’t be required to be in the decision-making process as much, you’ll have some (albeit limited) free time to grow the company faster, placing trust in talented staff to implement other company functions.   

Disadvantages of business growth

Larger businesses tend to be more complicated than smaller firms. Some of the common disadvantages with business expansion are:

  • shortage of cash – You may need to borrow additional funds to meet aggressive expansion costs, for example buying new premises or equipment
  • loss of control – as your business grows, you’ll have to delegate management duties or divide the workloads between different team members – which may result in the initial founder vision not being adhered to.
  • increased capital requirements – a more substantial business means a larger workforce, more facilities or equipment and more investment
  • increased staff turnover – for example, if staff are given additional work, their morale sometimes dropped, resulting in their productivity decreasing. Or worse, the investment placed in them could be lost if they left the company
  • corporate bureaucracy – namely that the decision-making process dramatically slows down, increasing inefficiency

Growth places pressure on staff, resources and finances. If you expand too quickly, you risk your entire business becoming unsustainable.

Overall as a CEO, your aim should be to build something brilliant, that differentiates from your competition. Naturally, you want your company to be the very best at what it does, to provide your talented employees with the opportunity to not only succeed but surpass their expectations and achieve their dreams. Whether this is buying a house, purchasing a nice car (if that’s vital to them) or raise a family comfortably without worrying about their personal finances.

About the author

David Bailey-Lauring is a single father of three boys and a content writer and regularly writes about sport, business, education and tech in the UK, USA, and Europe.

Share on facebook
Share on twitter
Share on linkedin
Share on pinterest

Contact me

If you’re looking to commission a piece or would like to discuss anything you’ve read on my blog please get in touch. I’m also open to accepting guest posts so if you’re an artist or a writer and this interests you hit the button below.