Take this Lesson from the GoDaddy Host Europe Group Acquisition

godaddy-logoArizona-based website services vendor GoDaddy is acquiring rival company Host Europe Group for €605 million (approximately $641 million USD). The expansion will add some 1.7 million customers to its existing 13 million. It will also add more employees to its current total of 4,908 team members. As a result of the acquisition, GoDaddy stock rose 4 percent, according to a news report by the Wall Street Journal.

How to Overcome Small Business Expansion Fears

The website services vendor is known for offering all kinds of deals off its products and is expanding its operations to include more customer choices. The company also recently bought Australian-based startup WP Curve, a support services provider for WordPress websites. That’s a significant expansion execution and it’s not one without risks. While both acquisition entities have proven track records, there’s no guarantee those will continue.

One thing that keeps business owners up at night is whether people will buy what their company is selling. A recent Forbes Insights and Cox Business report, which surveyed 300 executives at small U.S. businesses comprising 5 to 15 employees, found that this is a common concern. According to the survey, 22 percent of entrepreneurs found that attracting enough clients to support their company’s growth is their biggest challenge to scaling up. Twelve percent cited adequately supporting customers. —Forbes.com

There are plenty of examples where expansion didn’t pay off. For instance, retail chain Target opened 133 stores in Canada at a rapid rate in 2013. Just two years later, Target had closed all 133 stores by the spring of 2015, costing the retailer a jaw-dropping $7 billion loss. The expansion was clearly a huge, giant, colossal misstep. Risk is inherent in business and it, along with other fears, can keep entrepreneurs from expanding. That’s unfortunate because it prevents owners from growing their companies. Here are some tips for how to overcome small business expansion fears:

  • Lack of capital. Money plays such a big role in business that it cannot be ignored. Expanding means increasing expenses and usually taking on additional costs. So, plan ahead and study your target market to learn what to expect. When you’re estimating costs, be liberal with your expense numbers and conservative with estimated sales. This helps to lessen your apprehension and will also let you know if the move is feasible.
  • A product’s demand. Just because a product sells in one market does not mean it will perform the same in another market. This is where being incremental will serve you best. By testing the market with a small product introduction, you’ll learn more about how it will be received. It might require a bit of tweaking your marketing but if it works then you can continue to move forward. If it doesn’t sell, even after reworking your marketing, that’s a good indication it won’t work.
  • Taking on unknown employees. Sometimes, expanding means acquiring another operation and that entails taking on unknown employee personalities. So, get in-the-know about the other team members as soon as possible. You can even have some of your current employees work alongside the acquired team members to make it a smoother transition.
  • Cannibalizing current services, products and store locations. Expanding product or services or locations will divert your current customers/clients attention and purchases. Make certain that these added products, services and locations add revenue due to new markets and offerings vs competing with your current products, services and locations. We helped one of our retail clients research, analyze and determine the best strategy and location for opening new stores so that they did not cannibalize other stores, Today, this retailer is seeing success as a result of proper planning.
  • Inefficient management. Expanding necessarily increases management demand. That’s okay, if you are willing to promote some of your current team members and/or promote new employees. By delegating instead of demanding, the expansion will be off to a strong start.

Have you expanded your business? What concerns did you have and how did you deal with them? What other suggestions do you believe are helpful? Please share your experiences and thoughts!

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