Every retailer’s dream scenario is to build a successful business then transform it into a bustling empire. Being ambitious is no crime, but business scaling is not a decision that should be taken lightly. Here at Erply, we put our heads together to compile a handy list of what we think are the pros and cons of scaling. Have a look and see what you think…
The Pros
- The inevitable economies of scale: With economies of scale, the cost per unit decreases when the product is created in large numbers. Companies may choose to boost their production to achieve profits. For instance, producing 100 units of a product for the same price at which they previously created 75 units, ensures profit, as the sale of the extra 25 units would be pure profit.
- Employment opportunities — Two perks here: one, you get to hire people who bring with them fresh ways of thinking. Two, you help the local community by offering employment opportunities to unemployed individuals - both things we love here at Erply. New employees offer innovative ideas with their understanding of new-age techniques, and boosting the local employment ecosystem is never a bad thing.
- The probability of profitability: If done right, scaling will lead to success, no doubt. A bigger business has the potential to make more money.
- Getting noticed: The bigger you get, the more heads you’ll turn. If you scale yourself appropriately, everyone will be talking about you.
- A larger chunk of the market: When you produce more, you’re actually trying to expand your customer base. Your aim is to boost market demand in order to sell your extra produce. To do this, you’ll probably want to conduct aggressive marketing campaigns or offer your products at unbeatable rates.
The Cons
- Supply chain management issues - Supply chain management helps you to enhance customer value and gain a competitive edge in the marketplace. Expanding a business is easy but managing its success over the long term is tricky. You need a super-coordinated supply chain, or it won’t be long before you hit problems. It’s all about efficiency.
- Potential brand dilution - Employee motivation is a key consideration for any business, and it’s not something that’s easy to cultivate. As you scale, you may find that new employees do not have the same zeal and motivation as those who have been part of your team for a long time. You’ll need to hire new employees smartly and train them well.
- Additional expenditure - It’s a fact of business: to produce more costs more. It’s likely that scaling your business will force you to put your hands deep into your pockets. Patience is important, too. Don’t expect to get results straight away. The cost of expansion is an important thing to consider before scaling your business.
- Trade pressure is hard to comply with: - to achieve economies of scale, you’ll need to increase your sales output. Some entrepreneurs prefer to buy goods in bulk to increase sales volume, but it is quite risky. Hiring new employees or investing in marketing campaigns in an attempt to increase profits can also be risky, and it might generate tension between leaders and employees.
- Inventory excess - This is a major risk of scaling. Whatever produce you can’t sell, you may have to get rid of though discounted offers, reducing your gross profit. This is particularly bad if you bought goods in bulk and the market demand for them has since waned.
So, that’s six pros and six cons that we could think of, but when it comes down to it, the decision to scale can only be made by you. And there’s no need to feel hopeless or demoralised after reading the risks involved in scaling, as millions of enterprises have managed to scale successfully, and you can too.. Of course, the most important thing that you can take from this article is that Erply has built a POS solution with the power to scale in tandem with your business, whatever your size or ambition. Whatever you decide to do, Erply will be at your side, working for your benefit.
Erply Australia is a SaaS provider helping Australian retailers to manage their inventory and sell more through state of the art POS and ERP solutions. For more information about Erply’s activities in Australia, please visit our website at www.erplystaging.wpengine.com.au website or contact our Sydney office to see how we can help your business grow.
