In the context of growing your social business expansion means increasing production and sales while maintaining the shape of the business as well as the product range and customer definition.
This is by far the simplest model for growth since it requires the least innovation or journey into the unknown.
Scaling up a social businesses
Before you launch into expanding your social business, there are a number of aspects you need to consider to ensure this is the best route for growth. ‘Organic’ expansion may seem like a good thing, but without proper planning, due diligence and/or risk analysis it will only lead to trouble.
Work through each of the steps listed below to determine if expansion is the right choice for your business:
Evaluate your social business capital
Undertaking expansion without providing for increased working capital can lead to 'overtrading', which can result in cash shortage and even insolvency. When you are overtrading, the cash requirement for continued trading is higher and cash flow becomes more vulnerable to small fluctuations, such as late payments by a customer.
Prior to expansion, take stock of the capacity of your capital base to make sure your business can deal with this model of growth.
Revise your business plan
Expansion planning involves revising your full financial projections to make sure that you’ve identified and costed all aspects which require an increase in capacity (e.g. human resources, facilities, systems, supplies), rather than just those related directly to production.
Revisit your business plan and consult with the stakeholders in your social business that 'own' that plan.
Once the financial projections are nailed down, you can check unit costs and profitability. It seems common sense that expansion leads to economies of scale, but this is not always the case. The expansion may require capitalisation of one-off costs such as recruitment and re-equipping, as well as working capital.
Chaos is difficult and expensive to manage and leads to burn out. Since lead time on the introduction of new people or processes can prove longer than estimated, it is good practice to allow for these contingencies and make it clear which elements of the plan are critical to the timeline.
At the very least, a meaningful expansion will require an implementation plan to ensure that all these elements are introduced in a timely and planned way, as opposed to reactively and chaotically.
Critical Path & Risk Analysis
In more complex scenarios, we recommend conducting a full critical path analysis to make the change management process easier. A critical path analysis maps out each of the elements of your expansion plan, how they co-ordinate with each other and the timeline for putting them into place.
The exercise will show the 'pinch points' where several different elements are supposed to be managed and worked upon simultaneously. This will provide a better picture of the total timespan required.
Risk analysis now becomes much easier. How doable is that implementation plan? What risks are there along the way? How can they be mitigated?
We offer a wealth of information, advice and guidance for social business owners. Below, we’ve listed some more useful resources on social business expansion: