The Procrastination Penalty
(Part 5 – Business Expansion)
One should start to think about business expansion as soon as the present business is cash positive. That expansion could be in the form of a new location, new or improved product offering, expanding the size of your present location, entering new markets, buying a competitor, or a variety of other expansions that can take a fair amount of cash.
I do encourage you to take a little extra time in the planning stages to determine if market conditions make it the right time for expansion, and if not then shift to doing all the things you can do before “breaking ground”. Permits, more market research, extra engineering, etc., are all things you can and should work on while keeping the expansion in the wings and ready to launch before your competition can spring into action.
Once you pull the trigger, time is literally money, and procrastination is your enemy. In the hundreds of development projects I have been involved with or simply observed, NONE have ever come in on time. There were a few that I thought were going to make it, but some roadblock thwarted the schedule, usually an outside force that the business did not have complete control of, but late none the less.
I am witness to many more that had significant delays, that seriously hurt their cash-flow before their reveal. Again, most were outside forces, but many were last minute engineering changes, or financing issues which could have been mitigated with better planning.
Delaying business expansion can result in significant costs and missed opportunities that may impact both the short-term performance and long-term success of a company. These costs can be financial, operational, competitive, and reputational. Below are some key consequences of delaying business expansion:
- Missed Revenue Opportunities
- Loss of Market Share: Competitors may capitalize on opportunities in untapped markets, gaining a foothold and establishing customer loyalty before you can.
- Stagnant Growth: Delaying expansion prevents access to new revenue streams, limiting the company’s ability to grow and scale profits.
- Increased Costs Over Time
- Rising Expenses: Inflation, increased labor costs, and higher real estate prices may make expansion more expensive the longer it’s delayed and drive up the costs of entry, such as marketing and customer acquisition, making expansion more challenging later.
- Missed Economies of Scale: Expanding earlier allows businesses to benefit from reduced per-unit costs through higher production or operational volumes.
- Competitive Disadvantages
- Loss of First-Mover Advantage: Being the first to expand into a new market often allows businesses to establish brand recognition and customer loyalty ahead of competitors.
- Weaker Competitive Position: Delayed expansion can make it harder to compete with rivals who already have a presence, network, and brand equity in the target market.
- Reputation and Brand Perception
- Appearing Stagnant: A lack of expansion may signal to stakeholders, customers, or employees that the company is not ambitious or forward-thinking.
- Customer Perception: Delays might frustrate customers who expect your products or services in their region or industry.
- Loss of Talent and Resources
- Inability to Attract Top Talent: Expanding into new markets often creates opportunities to hire skilled professionals. Delays may result in losing those talents to competitors.
- Resource Under-utilization: Existing resources, such as capital or talent, may be underused if expansion plans are stalled.
- Decline in Innovation
- Missed Feedback Loops: Expansion into new markets provides valuable insights about customer needs, preferences, and trends that can inform product or service innovation.
- Lack of Adaptation: Delaying expansion may limit a company’s ability to adapt to changing market dynamics, leaving it vulnerable to disruption.
- Reduced Long-Term Profitability
- Diminished Growth Potential: Each year of delay may reduce the cumulative growth potential over the long term.
- Opportunity Costs: Resources tied up in delayed expansion could have been invested in other growth opportunities, leading to unrealized gains.
- Strategic Risks
- Market Saturation: Waiting too long may mean entering a market that has already reached saturation, making it harder to stand out or succeed.
- Economic Uncertainty: External economic conditions may worsen during the delay, making expansion riskier or less feasible.
- Investor and Stakeholder Concerns
- Reduced Confidence: Investors and stakeholders may interpret delays as a lack of vision, leadership, or capacity to execute growth plans.
- Lower Valuations: Companies perceived as slow to expand may face lower valuations, reducing opportunities for funding or partnerships.
- Psychological Costs
- Missed Momentum: Businesses often benefit from the energy and optimism that come with growth initiatives. Delays can lead to stagnation in company culture and outlook.
- Increased Stress: Prolonging decision-making on expansion can create ongoing uncertainty for leadership and employees.
Here are a few critical strategies to mitigate costs of delays:
- Plan for Scalable Growth: Ensure systems, resources, and processes are ready to support expansion when the opportunity arises.
- Conduct Ongoing Market Research: Stay informed about new opportunities and competitor actions to avoid being caught off guard.
- Secure Necessary Funding Early: Arrange for financing or investment in advance to avoid delays due to capital shortages.
- Build Strategic Partnerships: Collaborate with local partners to reduce entry barriers and speed up market penetration.
- Adopt a Phased Approach: Expand in stages to minimize risk and generate early returns that can fund further growth.
A couple of good examples of delayed growth allowing other competitors to gain a foot hold is Chick-fil-A on the east coast, and In and Out Burger in the West. Both companies held a lock on their respective marketplaces, but their focus on developing their regions allowed other direct competitors to gain footholds in many other markets. 5 Guys and Culvers expanded where In and Out Burger had their back turned. Zaxby’s and Raising Canes Chicken beat Chick-fil-A to many markets long before Chick-fil-A was even thinking about those regions.
Procrastination in expanding your business can lead to tangible and intangible costs that affect profitability, competitiveness, and overall growth potential. By addressing barriers to expansion proactively and strategically, businesses can position themselves to capitalize on opportunities and minimize the risks associated with waiting too long.
1,008
