Problem Solver: What is the best way for my fast-growing business to expand?
Q: My business has been growing rapidly over the last number of years. The premises is now too small to sustain any more growth, but I am nervous about moving premises or expanding the current building. Can you give any advice?
A: It is great to hear that your business is growing at such a rate. There are obviously lots of things that you are doing correctly that customers are responding to. It is always a challenge when it comes to investing, especially when the economy is not stable.
There is no reason to indicate that the growth you are getting is going to stop. Clearly customers are supporting you because you have the correct proposition for them and this is not going to change if you expand your premises and move into a larger one.
I would probably have a preference for expanding the current premises if that is possible as there is a lot to be said for habit-based customer patterns. I have seen businesses move across the road and struggle with customer footfall so you are best to capitalise on the traffic to the current site.
Revamping an existing building can be difficult where you have customers trying to shop at the same time, but I always applied several rules in Superquinn. Let customers know exactly what you are doing and apologise for the inconvenience caused. That way, you won't annoy people.
I think it is important that, if at all possible, you don't close the business during the revamp. Work your way around the building, closing off one area at a time to allow you do the works.
I recall making a big mistake once promoting a new shop we had built. We went on a heavy marketing campaign to advertise a new shop and it worked so well the place was packed out from dawn until dusk.
However, I met a customer two months later who told me they hadn't been in the shop since day one as they had such a bad experience with queues, and ever since then, we operated a much softer opening.
So my advice would be that when the work is completed, you develop a marketing campaign that gradually builds customer footfall and announces the new standards you have created.
Q: I run a successful production business and we have several hundred customers. The reality is that our business is successful because of a core group of around 30pc, with the balance being very small customers. I have found recently that the smaller customers are interfering with our ability to service the needs of the larger ones.
A This is a really interesting scenario and I was talking with a company recently who had a similar situation. Very often the 80:20 rule seems to work, in that 20pc of your customers bring in the majority of revenue and profit for your business with a significant number of smaller customers making up the remainder.
If the smaller customers are impeding your ability to service the larger ones, then this is a real dilemma.
The company I spoke with took a very brave decision. They went to all their smaller customers and explained that if they were to continue to do business with them, there would need to be a minimum order.
While some of these smaller customers put more of their business through the company, others simply could not reach the minimum order. The business then had to make the tough decision to move away from servicing these customers and to focus on the remaining core group.
The results were staggering and sales have jumped by almost one-third since they started to focus on the larger remaining customers. Now that sounds like crazy advice to abandon some customers, but the reality was they were not looking after their existing customers properly.
You have to be very careful about adding new customers into any business without first checking that the existing customers are being looked after to the maximum level. Every customer is critical, however you need to be sure that the sales process is maximised with existing customers before you take on a single new customer.