How often have you heard the term “grow or die”? For most small businesses the goal is to grow the business from a one-person operation into some kind of large corporation. If this is what you want, proceed carefully because businesses are very vulnerable during periods of extreme growth. You should probably look elsewhere for information because this book is geared to the one-person business. However, check out the list below for some of the things that are involved with expansion to a large business.

Accounts receivables become a large part of your business. You will have to develop good collection methods to make certain that your company gets paid for all of sales in a timely manner. You can’t let things pass because that affects cash flow adversely. Without sufficient cash flow you won’t be able to pay the bills that will continue to come in regardless of how collections go. This situation can lead to bankruptcy because you are unable to pay your debtors.

Expansion always involves hiring employees and this brings many new problems into play. First, of course, you must make certain that you hire good, productive employees who will care about their work. You also have the problem of payroll deductions and payroll payments to the IRS. This means your entire accounting system must be upgraded to deal with this in a way that meets government standards. And we still have not covered the additional cost of insurance and the large cost of worker’s compensation. This means that an employee that works for $10.00 per hour will probably wind up costing you more than $20.00 per hour.

My experience with expansion in my woodworking business was not good. I decided that if I hired a competent woodworker I would have more time to concentrate on projects and the other woodworker could also increase my overall productivity. I really believed that it would free me up to do other jobs. Unfortunately, it did not work out that way.

I hired a professional woodworker and started sharing the work with him. I would do the designs and even create the cut lists and drawings. As it turned out I never had enough time to just concentrate on my projects. Instead I wound up overseeing his work to make certain that it met my standards. This drained time away from my work and reduce the benefits significantly.

Because of my consistent and stressful pushing, I got a lot more work done during the first six months. My gross income was somewhat higher for that 6 months period but the amount of profit was the same as when I worked alone. And, percentage wise, my profit margin was actually lower. I decided at that point to just work alone and simply hire someone to help me deliver and install projects.

Working alone I completed fewer projects but I made just as much money and avoided all the stress of dealing with an employee. Plus I avoided all the payroll hassles. I continued in the business for many years without employees.

One of the reasons that I explored the employee route was that my volume of work had increased significantly. At one time I had a project backlog of more than eight weeks. After my experience with hiring an employee I decided to deal with my large backlogs by raising my prices significantly. After a few adjustments I got to the point that I maintained a two or three week backlog of work most of the time and was charging top dollar.

During those large backlogs I also learned to adjust prices based on my feelings about the potential customer. Since time is critical, those customers who take up more of your time should be paying more. You can usually tell a lot about a customer while you are trying to negotiate prices or work out designs. I begin using my normal pricing for those potential customers that seemed easy to work with and raising my prices drastically for those that were troublesome.

This may seem unfair but it is no more so that the idea that prices are affected by supply and demand. When there is a large supply of something and a small demand, the price remains low. When the supply is small and the demand is high, the price goes up. It’s the same item but not the same price. So why not adjust for levels of difficulty and unpleasantness. By doing this, your outcome related to troublesome customers is always good. If you get the job, you will get paid more for putting up with the difficulties. If you don’t get the job, you won’t have to tolerate the difficulties. Either way you win.

Remember your reason for starting your own business. You wanted to be free from the hassles involved with your day-to-day job and do the kind of work you enjoy. Expansion, troublesome employees and unpleasant customers are not conducive to a happy small business environment. I suggest that you avoid them as much as possible.